Effect Of Macroeconomic Determinant Of Capital Market Performances In Nigeria

Effect Of Macroeconomic Determinant Of Capital Market Performances In Nigeria

Chapter One

Preface

Background to the study

The capital request in any country is one of the major pillars of long term profitable growth and development. The request serves a broad of clientele including dierent position of government, commercial bodies and individualities within and outside the country. For quite some time now, the capital requests generally, are believed to be heart beat of

the frugality given their capability to respond nearly presently to abecedarian

changes in the frugality( Maku & Atanda, 2010).

The capital request is known as the equity or stock request and is one of the important areas of a request frugality as it provides access to capital to companies, power in the company for primary investors and the capabilities of earnings grounded on the rms unborn performance for secondary investors( Osoro, 2013). Returns from similar equity investments subject to vary owing to the movement of share prices, which depends on colorful factors which could be internal or rm specic similar as earning per share, tips and book value or external factors similar as interest rate, GDP, Ination, government regulations and foreign exchange rate( Omodero & Ekwe, 2016). Capital request performance is the index of stock request as whole. It gives signal to the investors about their unborn moves. The movement in the price of the stock and the indicators gives the idea of the near future trend of the stock or sector as a whole( Maku & Atanda, 2010). As nancial sphere is the most important bone of an frugality, so the capital request performance works as an index of the overall health of the frugality.

Capital request indicators generally gives the overall performance of the request, indicators

react the performance of the frugality( Barako, 2007). Stock price is used as a standard or an index of the performance of a stock and if the price of a particular stock is rising, also it’s perceived that it has certain positive

news or signals. But if it decreases also there must be some news regarding its performance, which is generating negative signals to the request( Osoro, 2013). Hence, the stock price movement and indicator movement show the general profitable trend of a country. Capital request performance aected by a wide array of factors as profitable, political, transnational and company specic issues, and it’s imperative for the nancial director of the rms to pay due attention to the factors that inuence stock prices as this could help them enhance rm value in the request( Garcia & Liu, 1999). Brinson, Singer and Beebower( 1991) dened macroeconomic variables as those that are material to a broad frugality at the indigenous or public position and aect a large population rather than a many named individualities. The variables indentied as having major inuence include ination, gross domestic product( GDP), currency exchange

rates, interest rates, legal and nonsupervisory terrain and threat. These variables are nearly observed by business, government and consumer and they’ve an impact on the capital request performance. Kwon and Shin( 1999) observe that an frugality aect the performance of its capital request and by extension the most influential macroeconomic variable are GDP, exchange rate, interest rate, ination and request threat.

Sharma and Singh( 2011) set up that numerous capital request performance, which typically

carry out their investment over a long duration of time and generally they’ve an anticipation that macroeconomic variable will remain stable and favorable to their operation over the entire duration of their investment. The movement in stock prices is directly related to some fundamentals like performance of the rm, movement in crucial

macroeconomic variable and government conduct( Karitie, 2010)

The linking of macroeconomic variable and capital request is the aggregate capital request frame, where a change in given beginning methodical threat factor impacting unborn returns. utmost of the empirical studies, linking the state of macroeconomy to capital request returns or performance, are characterized by modeling a

short run relationship between macroeconomic variables and stock prices, assuming trend stationarity( Andrew & Peter, 2007). In assessing the determinants of capital request performance, this paper will substantially consider exchange rate, inactivity rate, plutocrat force and real gross domestic product( real GDP).

Statement Of The Problem

The performance of the capital request in any country is the index of general profitable performance and is an integral part of the frugality of any country. With the preface of free and open profitable programs and advanced technology. Investors are nding easy access to capital request. The fact that capital request indicators have come an index of the health of the frugality of a country indicates the significance of capital request. The adding significance of the capital request has motivated the expression of numerous propositions to describe the working of the capital request( Gupta, Chavaller and Sayeki, 2008).

Garcia and Liu( 1999) established that macroeconomic volatility doesn’t aect

capital request performance. While Maku and Atanda( 2010) revealed that the stock request

performance in Nigeria is substantially acted by macroeconomic forces in the long run in Nigeria.

Ting, Feng, Weng, and Lee( 2012) established that Kuala Lumpur compound indicator is constantly inuence by interest rate, plutocrat force and consumer price indicator in short run and long run in Malaysia. Mahwish( 2013) established there’s negative relationship between real interest rate and stock request performance in Pakistan. Jahur, Quadir and Khan( 2014) established microeconomic variable similar as consumer price indicator, interest rate have signicant impact on the stock request performance in Banglade. It’s notable that there’s lack of agreement of the eect of macroeconomic factors, on capital request performance. thus, this study will examine themacro-economic determinant of capital request performance in Nigeria.

Exploration Questions

What are the relationship between the capital request andmacro-economic

variable in Nigeria?

What are the impact of macroeconomic variable on the Nigerian capital request

performance?

Exploration Objects

The general ideal of this study is to examine the eect

of the named

macroeconomic determinant of capital request performances in Nigeria. The specic

objects of the study are

Examine the relationship between the capital request andmicro-economic variable

in Nigeria?

probe the impact of macroeconomic variable on the Nigerian capital request

performance?

Exploration Hypotheses

The following suppositions were tested for the purpose of the study;

Ho1 There’s no signicant

relationship between the capital request and macroeconomic

variables in Nigeria

Ho2 there’s no signicant impact of macroeconomic variables on Nigerian Capital Market performance.

Signifcance of the study

The Nigerian Securities and Exchange Commission and Nigerian Stock Exchange( policy maker); the study ndings will be of great benet in phrasings and perpetration of programs related to share pricing as well as regulating of stock exchange trading. The government will also be informed on how to make programs, rules and regulations regarding trading rule that will help cover investors so as to encourage investment and goad profitable growth.

enterprises and individual( Investors) The nding will help them in understanding the factors acting share prices and they will be better informed on how to range their investment options while banks and other fiscal institution will be investors who seeks ndings to nance share purchases. In addition, scholars and experimenters will nd the study useful if they wish to use the nding as a base for carried and farther exploration on the subject.

Compass Of The Study

The exploration covered an evaluation of macroeconomic determinant of capital request performance in Nigeria. The compass of the study is the Nigerian stock exchange, making use of the capital request performance pointers similar as request capitalization. The study covered the period of 1985- 2015 and named macroeconomic variable similar

as real GDP, ination rate and plutocrat force in determining capital request performance.