Analysis of Macroeconomic Aggregates on Stock Prices in Nigeria: An Application of Co-Integration and Causality Tests 1985 – 2011


This study examined the analysis of macroeconomic aggregates on stock prices using evidence from Nigeria Economy. The study investigated the nature of relationship between macroeconomic aggregates proxies by inflation rates, interest rates and money supply while All Share Index (ASI) standing as a proxy for Aggregates Stock Prices.. In course of this study, secondary data were sourced from the Central Bank of Nigeria statistical bulletin and the Nigerian stock exchange fact book. The Granger Causality Test and Johansen Co-integration Test in a Vector Error Correction Model (VECM) setting were employed. The descriptive analysis was also used to mirror their relationship. The empirical results demonstrate that changes in inflation rates, interest rates and money exert a significant impact on aggregate stock within the period understudy. The results also shows that where is a negative long-run relationship between inflation rates, interest rates and All Share Index while a positive significant relationship exist between money supply and aggregates stock prices. However, on the causality test, the study shows a unidirectional causality running from inflation to aggregates stock price and a bi-directional causality between money supply and aggregates stock prices. Therefore, we recommended that macroeconomic policy should be channeled towards improving aggregates stock prices which in turn enhance overall returns on stock market and the Nigerian economy at large.

Keywords: Co-integration, Macroeconomic Aggregates, Stock Prices

Article Review Status: Published

Pages: 56-79 (Download PDF)

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