The Effects of Unstable Macroeconomic Indicators on Stock Price Behavior of Banking Sector in the Nigerian Stock Market
Keywords:macroeconomic indicators, stock price behavior, banking sector, Nigerian stock market
The research aimed to investigate the stock price behavior of banking sector in response to unstable macroeconomic variables in the Nigerian stock market. The research employed ex-post facto research design, and the data were subjected to Autoregressive Distributed Lag method of analysis to examine both the short and long run of the studied variables between 2009 and 2018. The findings reveal significant negative effects of interest rate and foreign reserves on the stock price behavior of the banking sector in the long run. Meanwhile, the inflation rate has a significant positive influence on stock price behavior. Then, the exchange rate is not statistically significant in influencing stock price behavior in the Nigerian stock market. It can be concluded that the stock price behavior of banking sector is influenced by foreign external reserve, interest rate, and inflation rate. It is recommended that the monetary policy rate should be reduced to decrease the cost of borrowing and enhance liquidity level in the stock market.
Ajayi, O. I. (2013). Understanding monetary policy sereies no 31. Retrieved from https://www.cbn.gov.ng/out/2016/mpd/understanding%20monetary%20policy%20series%20no%2031.pdf
Asamoah, R. O., Baiden, B. K., & Nani, G. (2019). Towards the establishment of relationship between macroeconomic indicators and cost of public educational buildings in Ghana. Journal of Engineering, 2019, 1-7.
Celebi, K., & Hönig, M. (2019). The impact of macroeconomic factors on the German stock market: Evidence for the crisis, pre-and post-crisis periods. International Journal of Financial Studies, 7(2), 1-13.
Central Bank of Nigeria (2018). Central Bank of Nigeria annual report on financial sector in Nigeria. Retrieved from https://www.cbn.gov.ng/documents/reports.asp
Gilbert, T., Scotti, C., Strasser, G., & Vega, C. (2017). Is the intrinsic value of a macroeconomic news announcement related to its asset price impact? Journal of Monetary Economics, 92(December), 78-95.
Giri, A. K., & Joshi, P. (2017). The impact of macroeconomic indicators on Indian stock prices: An empirical analysis. Studies in Business and Economics, 12(1), 61-78.
Khalid, W., & Khan, S. (2017). Effects of macroeconomic variables on the stock market volatility: The Pakistan experience. Global Journal of Management and Business Research, 17(4-B), 69-91.
Kurotamunobaraomi, T., & Ebiware, A. E. (2017). and stock prices: The Nexus. International Journal of Banking and Finance Research, 3(1), 49-58.
Kwofie, C., & Ansah, R. K. (2018). A study of the effect of inflation and exchange rate on stock market returns in Ghana. International Journal of Mathematics and Mathematical Sciences, 2018, 1-8.
Mbulawa, S. (2015). Stock market performance, interest rate and exchange rate interactions in Zimbabwe: A cointegration approach. International Journal of Economics, Finance and Management, 4(2), 77-88.
Okech, T. C., & Mugambi, M. (2016). Effect of macroeconomic variables on stock returns of listed commercial banks in Kenya. International Journal of Economics, Commerce and Management, IV(6), 390-418.
Omankhanlen, A. E., Senibi, E. J., & Senibi, V. K. (2016). Macroeconomic indicators and stock price movement Nexus: A study of the Nigerian stock market. The Social Sciences, 11(13), 3294-3306.
Ouma, W. N., & Muriu, P. (2014). The impact of macroeconomic variables on stock market returns in Kenya. International Journal of Business and Commerce, 3(11), 1-31.
Pal, S., & Garg, A. K. (2019). Macroeconomic surprises and stock market responses—A study on Indian stock market. Cogent Economics & Finance, 7(1), 1-31.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics,16(3), 289-326.
Ray, S., & Saha, M. (2016). Dynamic association between macroeconomic variables and stock return volatility: Evidence from India. American Journal of Business, Economics and Management, 4(4), 40-56.
Rjoub, H., Civcir, I., & Resatoglu, N. G. (2017). Micro and macroeconomic determinants of stock prices: The case of Turkish banking sector. Romanian Journal of Economic Forecasting, 20(1), 150-166.
Shrestha, M. B., & Bhatta, G. R. (2018). Selecting appropriate methodological framework for time series data analysis. The Journal of Finance and Data Science, 4(2), 71-89.
Uwubanmwen, A., & Eghosa, I. L. (2015). Inflation rate and stock returns: Evidence from the Nigerian stock market. International Journal of Business and Social Science, 6(11), 155-167.
Wooldridge, J. M. (2013). Introductory econometrics: A modern Approach (5th ed.). Cengage Learning
Zhou, L., & Huang, J. (2019). Investor trading behaviour and stock price crash risk. International Journal of Finance & Economics, 24(1), 227-240.
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.
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)