A weighted least squares analysis of globalization and the Nigerian stock market performance

Raymond Alenoghena and Odior Simeon Ernest

Journal of Economic and Financial Studies (JEFS), 2013, vol. 1, issue 1, 61-73

Abstract: The study empirically investigates the impact of globalization on the performance of the Nigerian Stock market. The study seeks the verification of the existence of a linking mechanism between globalization through trade openness, net inflow of capital, participation in international capital market and financial development on Stock Market performance over the period of 1981 to 2011. The methodology adopted examines the stochastic characteristics of each time series by testing their stationarity using the Im, Pesaran and Shin W-stat test. The weighted least squares regression method was employed to ascertain the different level of impacts on the above subject matter. The findings were reinforced by the presence of a long-term equilibrium relationship, as evidenced by the cointegrating equation of the VECM. The Model ascertained that globalization variables actually positively impacted on stock market performance. However, the findings reveal that while net capital inflows and participation in international capital market have greater impact on the Nigerian Stock market performance during the period under review. Accordingly, it is advised that in formulating foreign policy, policy makers should take strategic views on the international economy and make new creative policies that will foster economic integration between Nigeria and its existing trade allies. These creative policies will also assist to create avenues for the making new trade agreements with other nations of the world, which hitherto were not trade partners with Nigeria.

Keywords: Globalization; Performance; Stock market; Weighted least squares. (search for similar items in EconPapers)
JEL-codes: D23 D62 H41 L33 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:lrc:lareco:v:1:y:2013:i:1:p:61-73

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