The Impact of Macroeconomic Indicators on Stock Prices in Nigeria

Anthony Olugbenga Adaramola

Abstract


This study set out to investigate the impact of macroeconomic indicators on stock prices in Nigeria. Since none of the previous writers in this area looked at the study at the individual firm's level, the research work is therefore unique as it uses a different methodology to consider it at the micro level.

Secondary data on stock prices of selected firms and six macroeconomic variables between 1985:1 and 2009:4 were used for the analysis. The macroeconomic indicators used in the research work are: money supply (BRDM), interest rate (INTR), exchange rate (ECHR), inflation rate (INF), oil price (OIL) and gross domestic product (GDP).The pooled or panel model was used to examine the impact of macroeconomic variables on stock prices of the selected firms in Nigeria. This model was considered appropriate for its ability to combine both time series and cross-sectional data.  The empirical findings of the study revealed that macro economic variables have varying significant impact on stock prices of individual firms in Nigeria. Apart from inflation rate and money supply, all the other macroeconomic variables have significant impacts on stock prices in Nigeria

The study therefore concluded with empirical evidences that trends in macroeconomic variables can be used to predict movement of stock prices to a great extent in Nigeria.

Keywords: Macroeconomic Indicators, Stock Market, Pooled or Panel Model,


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