IMPACT OF SELECTED MACROECONOMIC DRIVERS ON THE BEHAVIOUR OF THE NIGERIAN STOCK MARKET

Abstract

The behaviour of macroeconomic variables exerts impact on the operations and happenings in the stock market and by extension the economy in general. This study investigated the impact of some macroeconomic variables (real gross domestic product, foreign direct investment, aggregate government expenditure, and real exchange rate) as drivers and catalyst to the performance of the Nigeria stock market, utilizing the time series data from 1986 – 2020. Stationarity test was conducted to determine the order of integration, Johansen cointegration test for long run relationship among the variables. The ARDL-ECM model was specified and estimated to determine the short and long run impacts of the independent variable on the dependent variable. ECM component of the model shows the speed of adjustment from short run disequilibrium to long run equilibrium. Findings reveal the positive impacts of the selected macroeconomic drivers on the performance of the stock market proxied by All share index (ASI) in both short and long run. The study thus recommends deliberate undertaking of policies that will encourage inflows of FDI as well as increase aggregate spending for sustained positive impact on the stock market.