Effects of Exchange Rate, Interest Rate, and Inflation on Stock Market Returns Volatility in Nigeria

Izunobi Anthony Okechukwu, Nzotta Samuel Mbadike, Ugwuanyim Geoffrey and Benedict Anayochukwu Ozurumba
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Izunobi Anthony Okechukwu: Department of Financial Management Technology, Federal University of Technology Owerri, Nigeria
Nzotta Samuel Mbadike: Department of Financial Management Technology, Federal University of Technology Owerri, Nigeria
Ugwuanyim Geoffrey: Department of Statistics. Federal University of Technology Owerri
Benedict Anayochukwu Ozurumba: Department of Financial Management Technology, The Federal University of Technology Owerri

International Journal of Management Science and Business Administration, 2019, vol. 5, issue 6, 38-47

Abstract: TThis study employed GARCH (1.1) techniques to evaluate the existence of high stock market returns volatility, and the impact of the exchange rate, interest rate and inflation on stock market returns in Nigeria, using monthly series data from 1995 – 2014. Excessive volatility hinders the stock market from playing its role of Mobilizing, financial resources from surplus units to deficit units and may cause a financial crisis. The research finding shows that interest rate has a negative relationship with stock market returns, while the inflation rate and exchange rate have a positive relationship with stock market returns. The conclusion therefore is, there is high and persistent volatility in the Nigerian stock market returns. Exchange rate, interest rate, and inflation significantly impact stock market return volatility in Nigeria. The study recommends that regulatory authorities should take proactive steps to minimize stock market return in order to restore confidence in the market.

Keywords: Inflation rates; Exchange rates; Interest rates; Stock market return volatility and monthly series (search for similar items in EconPapers)
JEL-codes: M00 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:mgs:ijmsba:v:5:y:2019:i:5:p:38-47

DOI: 10.18775/ijmsba.1849-5664-5419.2014.56.1005

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