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Does Macroeconomic Indicators exert shock on the Nigerian Capital Market?

By Olukayode E. Maku and Akinwande A. Atanda


This study examines the long-run and short-run effect of macroeconomic variables on the Nigerian capital market between 1984 and 2007. The properties of the time series variables are examined using the Augmented Dickey-Fuller (ADF) test and most of the variables have a unit root at level. The Augmented Engle-Granger Cointegration test revealed that macroeconomic variables exert significant long-run effect on stock market performance in Nigeria. Also, the employed Error Correction Model (ECM) showed that macroeconomic variables exert significant short-term shock on stock prices as a result of the stochastic error term mechanisms. However, the empirical analysis showed that the NSE all share index is more responsive to changes in exchange rate, inflation rate, money supply and real output. While, all the incorporated variables which serve as proxies for external shock and other macroeconomic indicators have simultaneous significant impact on the Nigerian capital market both in the short and long-run.

Topics: E0 - General, G12 - Asset Pricing; Trading volume; Bond Interest Rates, G19 - Other, G10 - General
Year: 2009
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