INFLATION RATE AND MARKET CAPITALIZATION: A CRITICAL ANALYSIS OF PERFORMANCE IN THE NIGERIAN STOCK MARKET

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INFLATION RATE AND MARKET CAPITALIZATION....pdf (3.56 MB)

Date

2018-06-20

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Department of Accounting Nasarawa State University Keffi.

Abstract

The contribution of the capital market to the socio-economic growth of Nigeria is invariably threatened by the level of inflation that impounds on capitalization. This study thus set to evaluate the effect of inflation rate on market capitalization in the Nigerian stock market. In line with the objective of this study, secondary data were obtained from the CBN Statistical Bulletin and Security exchange commission (SEC) and then Nigeria covering the period of1999 to 2017. Market Capitalization is used as the dependent variable while inflation rate is as the independent proxy with interest rate as the control variable. The study adopts ordinary least square (OLS) method of analysis using Eviews statistical package. It is found that inflation rate has positive and significant relationship with market capitalization. The work concludes with fisher's hypothesis that equity stock could be used as hedging against inflation. The study recommends that the Central Bank of Nigeria (CBN) should formulate and use policy instruments that will maintain inflation at a reasonably level so that it will not erode the real value of stock gains, and hence performance in the long run

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Keywords

Inflation Rate, Market Capitalization, Stock Market, E-views, Nigeria.

Citation

Ajakaiye, O. & T. Fakiyesi (2009). Global Financial Crisis. Discussion Series Paper 8: Nigeria. London: Overseas Development Institute. Alagidedc, P. and T. Panagiotidis (2006). Can Common Stocks Provide a Hedge as against Inflation? Evidence from African Countries. The Rimini Center for Economic Analysis, Italy, WP 10-06. Aluko, E. M. (2008). The Global Financial Meltdown: Impact on Nigeria's Capital Market and Foreign Reserves. Amadsu D.E (2012). Interest Rate, Inflation Rate and Exchange Rate Influence on the Nigerian Slock Market Index. An International Journal of Arts and Humanities, Vol 1, No 3, pp 357-366. Baekaert, G. & E.C. Engstrom (2009), Inflation and the Stock Market: Understanding the 'Fed ModeI'(June, 2009) Bodie, Zvi. (1976). Common Stocks as a Hedge against Inflation. Journal of Finance 31(2). (2009). NBER Working Paper No. wl5024. Available at SSRN: http://ssrn.com/abstract= 1413588 Brueggeman, W.B.; Chen, A. & Thiboleau, T.G. (1984) "Real Estate Investment Fund Performance and Portfolio Considerations AREUEA Journal Vol. 12 No. 3 Pg 333-354. Chandra, P. (2004). Investment Analysis and Portfolio Management, McGraw-Hill, New Delhi Corrado, C.J. & Jordan, B. D. (2002). The Fundamentals of Investments Valuation and Management. 2nd ed USA, McGraw-Hill Companies Inc

URI

https://keffi.nsuk.edu.ng/handle/20.500.14448/688

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