Volatility and Nigeria Stock Market Performance: Evidence from Naira-Dollar Exchange Rate and Market Capitalization

AJIBODE, I. A and BUSARI, I. A (2020) Volatility and Nigeria Stock Market Performance: Evidence from Naira-Dollar Exchange Rate and Market Capitalization. Journal of Mathematics and Statistics Studies (JMSS), 1 (2). pp. 38-45. ISSN 2709-4200

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Abstract

This study investigates volatility and Nigeria stock market performance as evidenced from exchange rate and market capitalization using annual data spanning between 1986 to 2019 as extracted from the Central Bank of Nigeria (CBN) annual statistical bulletin. Johansen and Jesulius cointegration, Error Correction modeling and Generalized Autoregressive Conditional Heteroscedasticity (GARCH) estimation technique was adopted. The GARCH result showed that, exchange rate and market capitalization constitute significant sources of volatility to stock prices in both the short-run and long-run, with coefficients: 103.4074 and 0.15649 of variations in NSEAll Share Index respectively. In addition, coefficient of 〖ECT〗_(t-1) (-0.049851) of error correction estimate indicated that previous years deviation from long run equilibrium is corrected at a speed of 5% implying that, there exists a long-run cointegration or equilibrium relationship among the variables. This paper therefore, recommended that consistent application of Dutch Auction System can be embarked upon by Central Bank of Nigeria (CBN) to serve the purposes of reducing the parallel market premium, thereby conserving the dwindling external reserves to achieve a realistic exchange rate for the naira. NSE should also create enabling market policy for companies traded on the stock market so as to improve the performance of stock prices through market capitalization.

Item Type:	Article
Subjects:	Q Science > QA Mathematics Q Science > QA Mathematics > QA75 Electronic computers. Computer science
Divisions:	Faculty of Engineering, Science and Mathematics > School of Mathematics
Depositing User:	Mr. Bolanle Yisau I.
Date Deposited:	29 May 2021 15:24
Last Modified:	29 May 2021 15:24
URI:	http://eprints.federalpolyilaro.edu.ng/id/eprint/1488

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