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ABSTRACT
Using monthly pool data from 2018-2022, this study examined the long and short-run impact of the effects of exchange rate fluctuations on service sector stocks in Nigeria. Extensive and elaborate reviews of diverse literary works on the effects of exchange rate fluctuations on service sector stocks in Nigeria were carried out. This study is based on Arbitrage Pricing Theory. The descriptive analyses were carried out and its values were clearly interpreted. The Augmented Dickey Fuller (ADF) was employed to check for stationarity among the variables. Also, the Autoregressive Distributed lagged Variable (ARDL) model was the technique of analysis used. And the ARDL Bounds Test was carried out to check for the existence or otherwise of a long run relationship among the variables employed for this analysis. The long and short run models were also estimated and its results interpreted. The results therefore showed that some of the explanatory variables were significant to some extent in explaining variations in stock returns in the short run In conclusion, the study recommends that certain measures(policies) should be enforced in order to mitigate the negative effect of exchange rate fluctuations on service sector stock returns.
