International Journal of Developing and Emerging Economies (IJDEE)

EA Journals

Evaluating the Nexus between Macroeconomic Indicators and Stock Market Performance in Nigeria


This study examines the effect of macroeconomic indicators on stock market performance in Nigeria from 1986 to 2022 using time series data analysis. The analysis includes unit root tests, co-integration tests, and error correction model analysis to understand the long-term and short-term dynamics between macroeconomic variables and stock market performance. Various diagnostic tests, such as tests for autocorrelation, multicollinearity, and heteroscedasticity, were conducted to enhance the accuracy of the model. The results indicate a strong positive relationship between stock market performance and lagged values of Gross Domestic Product (GDP) and Inflation Rate (INF) in the long run. Economic growth, as indicated by GDP, and inflation rates play significant roles in driving stock market movements in Nigeria. Conversely, there is a negative relationship between stock market performance and lagged values of equity (EQUI) and interest rate (INTR), suggesting that changes in equity and interest rates may not have a long-term influence on stock market performance. The short-run analysis reveals short-term momentum in stock market performance, with past stock market returns and inflation rates positively affecting current stock market performance. However, variables like GDP, equities, exchange rates, and interest rates do not show significant short-term effects on stock market performance, indicating their impact may be more pronounced in the long run. These findings provide valuable insights for policymakers and investors seeking to understand the relationship between macroeconomic conditions and stock market movements in Nigeria.

Keywords: Exchange Rate, Inflation, Macroeconomic Variables, stock market performance

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Print ISSN: 2055-608X
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