Market Liquidity and Stock Return in the Nigerian Stock Exchange Market
DOI:
https://doi.org/10.21512/bbr.v10i2.5588Keywords:
market liquidity, stock return, Nigerian Stock Exchange marketAbstract
This research examined the effect of market liquidity, inflation, and exchange rates on stock return in Nigerian Stock Exchange market. The researchers used ex-post facto design and employed secondary data subjected to Auto-regressive Distributive Lag (ARDL) bound test method of analysis within the period of twenty-one years. Findings reveal that in the short run, stock turnover, trading volume, exchange, and inflation rates have affected stock return positively and significantly. In the long run, market turnover has a positive effect. However, inflation and exchange rates have affected stock return negatively and significantly. Then, trading volume has a negative but insignificant effect on stock return, which is all at 5% level of significance. The researchers conclude that market liquidity, exchange, and inflation rates affect stock return. Therefore, the researchers recommend demutualization and transparent structures and adaptive method stabilization in exchange rate policies to increase stock market patronage, minimize transaction costs, and mitigate the market uncertainties.
Plum Analytics
References
Abdullahi, I. B. (2011). Sectoral analysis of risks and returns of the quoted firms in the Nigerian capital market (Unpublished Ph.D. Thesis). University of Ilorin.
Abdullahi, I. B., Lawal, W. A., & Etudaiye-Muhtar, O. F. (2011). The effects of firm size on risk and return in the Nigerian Stock Market: A sectoral analysis. British Journal of Economics, 1(2),1-10.
Akram, N. (2014). The effect of liquidity on stock returns: An evidence from Pakistan. IOSR Journal of Business and Management, 16(2), 66-69.
Alnaif, K. L. (2014). Stock liquidity determination evidence from Amman Stock Exchange. Asian Economic and Financial Review, 4(12), 1894-1905.
Amihud, Y., Hameed, A., Kang, W., & Zhang, H. (2015). The illiquidity premium: International evidence. Journal of Financial Economics, 117(2), 350-368.
Ariwa, F. O., Ani, O. I., Onyele, K. O., Ekeleme, I. J., & Okwuchukwu, O. (2017). Impact of stock market liquidity and efficiency on performance of the manufacturing sector in Nigeria (1985-2014). International Journal of Economics and Financial Management, 2(1), 71-82.
Assefa, T. A., & Mollick, A. V. (2014). African stock market returns and liquidity premia. Journal of International Financial Markets, Institutions and Money, 32(September), 325-342.
Azar, S. A. (2014). The determinants of US stock market returns. Open Economics and Management Journal, 1(1), 1-13.
Bala, S. A. R., & Hassan, A. (2018). Exchange rate and stock market interactions: Evidence from Nigeria. Arabian Journal of Business and Management Review, 8(1), 1-5.
Demirgüneş, K. (2016). The effect of liquidity on financial performance: Evidence from Turkish retail industry. International Journal of Economics and Finance, 8(4), 63-79.
Haug, A. A. (2002). Temporal aggregation and the power of cointegration tests: A Monte Carlo study. Oxford Bulletin of Economics and statistics, 64(4), 399-412.
Jepkemei, B. (2017). The impact of inflation on stock market liquidity: A case of Nairobi Securities Exchange, Kenya. International Journal of Economics, Commerce and Management, 5(1), 319-350.
John, E. I. (2019). Effect of macroeconomic variables on stock market performance in Nigeria. Journal of Economics, Management and Trade, 22(6), 1-14.
Kahuthu, L. W. (2017). The effect of stock market liquidity on stock returns of companies listed on Nairobi Securities Exchange (Thesis). Strathmore University.
Kganyago, T., & Gumbo, V. (2015). An empirical study of the relationship between money market interest rates and stock market performance: Evidence from Zimbabwe (2009-2013). International Journal of Economics and Financial Issues, 5(3), 638-646.
Kolapo, F. T., Oke, M. O., & Olaniyan, T. O. (2018). Unravelling the impact of macroeconomic fundamentals on stock market performance in Nigeria: An ARDL-bound testing approach. Journal of Economics, Management and Trade, 21(3), 1-15.
Kudryavtsev, A. (2017). The effect of stock return sequences on trading volumes. International Journal of Financial Studies, 5(4), 1-15.
Leirvik, T., Fiskerstrand, S. R., & Fjellvikås, A. B. (2017). Market liquidity and stock returns in the Norwegian stock market. Finance Research Letters, 21(May), 272-276.
Okoye, L. U., Modebe, N. J., Taiwo, J. N., & Okorie, U. E. (2016). Impact of capital market development on the growth of the Nigerian economy. Research Journal of Financial Sustainability Reporting, 1(1), 24-32.
Onoh, J. O. (2016). The effect of stock market liquidity on daily returns in the Nigerian capital market. IIARD International Journal of Banking and Finance Research, 2(1), 54-72.
Onoh, J. O., Ibekwe, F. C., Onoh, U. A., & Egbo, B. U. (2017a). Measuring daily stock market returns using market capitalization ratio in Nigeria. GOUNI Journal of Management and Social Sciences, 4(2), 188-203.
Onoh, J. O., Ukeje, O. S., & Nkama, N. O. (2017b). Trading volume and market turnover in the Nigerian capital market: Implications to stock market returns. IIARD International Journal of Economics and Business Management, 3(1), 91-107.
Popoola, O. R., Ejemeyovwi, O. J., Alege, O. P., Adu, O., & Onabote, A. A. (2017). Stock market and economic growth in Nigeria. International Journal of English Literature and Social Sciences (IJELS), 2(6), 97-106.
Ross, S. A. (1976a). Return, risk and arbitrage. In I. Friend & J. Bicksler (Eds.), Risk and return in finance. Cambridge, MA: Ballinger.
Ross, S. A. (1976b). The arbitrage theory of capital asset pricing. Journal of Economic Theory, 13(3), 341-360.
Shammakhi, H. R., & Mehrabi, A. (2016). Study the effect of liquidity of stock on stock returns in the companies listed in Tehran Stock Exchange. International Journal of Economics, Commerce and Management, 4(12), 423-434.
Udoka, C. O., Nya, M. J., & Bassey, J. G. (2018). The effect of macroeconomic determinants of stock price movements in Nigeria. International Journal of Research-Granthaalayah, 6(1), 203-218.
Zaheer, A. L. A. M., & Rashid, K. (2014). Time series Analysis of the relationship between macroeconomic factors and the stock market returns in Pakistan. Journal of Yaşar University, 9(36), 6361-6370.
Downloads
Published
Issue
Section
License
Authors who publish with this journal agree to the following terms:
a. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License - Share Alike that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
b. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
c. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
USER RIGHTS
All articles published Open Access will be immediately and permanently free for everyone to read and download. We are continuously working with our author communities to select the best choice of license options, currently being defined for this journal as follows: Creative Commons Attribution-Share Alike (CC BY-SA)
