IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2020-02-1.html
   My bibliography  Save this article

Effect of Unstable Macroeconomic Indicators on Banking Sector Stock Price Behaviour in Nigerian Stock Market

Author

Listed:
  • Ibrahim Bello Abdullahi

    (Department of Finance, University of Ilorin, Kwara State, 240001, Nigeria.)

Abstract

Stable macroeconomic environment is critical to an efficient stock market and economic growth. Banking sector plays important role in sustaining the growth in Nigerian stock market. However, the effect of unstable macroeconomic factors on the sector's stock returns over the years cannot be ignored. This study seeks to investigate banking sector's stock price behavior in response to unstable macroeconomic variables in Nigerian stock market. Autoregressive Distributed Lag (ARDL) model was employed to examine both short run and long run effects on the study variables between 2009 and 2018. Findings revealed negative significant effects of interest rate and foreign reserves on the stock price behavior of the banking sector both in the short run and long run with -0.21 and -9.004 respectively. Inflation rate has positive significant influence of 0.42, while exchange rate is not statistically significant in influencing stock price behavior in Nigerian stock market, all at 1% level of significance. The study concludes that, banking sector stock price is being influenced by foreign external reserve, interest rate and inflation rate. The study recommends that monetary policy rate should be reduced in order to lower the cost of borrowings and enhance liquidity level in the stock market.

Suggested Citation

  • Ibrahim Bello Abdullahi, 2020. "Effect of Unstable Macroeconomic Indicators on Banking Sector Stock Price Behaviour in Nigerian Stock Market," International Journal of Economics and Financial Issues, Econjournals, vol. 10(2), pages 1-5.
    • Handle: RePEc:eco:journ1:2020-02-1
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/9041/pdf
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/9041/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stephen A. Ross, 2013. "The Arbitrage Theory of Capital Asset Pricing," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 1, pages 11-30, World Scientific Publishing Co. Pte. Ltd..
    2. Kaan Celebi & Michaela Hönig, 2019. "The Impact of Macroeconomic Factors on the German Stock Market: Evidence for the Crisis, Pre- and Post-Crisis Periods," IJFS, MDPI, vol. 7(2), pages 1-13, March.
    3. Husam RJOUB & Irfan CIVCIR & Nil Gunsel RESATOGLU, 2017. "Micro and Macroeconomic Determinants of Stock Prices: The Case of Turkish Banking Sector," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 150-166, March.
    4. Gilbert, Thomas & Scotti, Chiara & Strasser, Georg & Vega, Clara, 2017. "Is the intrinsic value of a macroeconomic news announcement related to its asset price impact?," Journal of Monetary Economics, Elsevier, vol. 92(C), pages 78-95.
    5. GIRI A. K. & JOSHI Pooja, 2017. "The Impact Of Macroeconomic Indicators On Indian Stock Prices: An Empirical Analysis," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 12(1), pages 61-78, April.
    6. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    7. Santanu Pal & Ajay K Garg, 2019. "Macroeconomic surprises and stock market responses—A study on Indian stock market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1598248-159, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sin-Yu Ho & N.M. Odhiambo, 2018. "Analysing the macroeconomic drivers of stock market development in the Philippines," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1451265-145, January.
    2. Animesh Bhattacharjee & Joy Das, 2022. "Assessing the long-run and short-run effect of monetary variables on stock market in the presence of structural breaks: evidence from liberalised India," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 14(2), pages 121-131, December.
    3. Animesh Bhattacharjee & Joy Das, 2021. "Investigating the Long-run and the Short-run Relationship Between Domestic Macroeconomic Forces and Indian Equity Market: Evidence Based on ARDL Bounds Testing Approach," Paradigm, , vol. 25(1), pages 61-76, June.
    4. Alexandra Horobet & Georgiana Vrinceanu & Consuela Popescu & Lucian Belascu, 2019. "Oil Price and Stock Prices of EU Financial Companies: Evidence from Panel Data Modeling," Energies, MDPI, vol. 12(21), pages 1-17, October.
    5. Simran, & Sharma, Anil Kumar, 2024. "Asymmetric nexus between economic policy uncertainty and the Indian stock market: Evidence using NARDL approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 91-101.
    6. Majeed, Raseena & Masih, Mansur, 2016. "Impact of macroeconomic variables on shariah stock markets: evidence from Malaysia based on ARDL approach," MPRA Paper 106118, University Library of Munich, Germany.
    7. Ho, Sin-Yu, 2017. "The Macroeconomic Determinants of Stock Market Development: Evidence from Malaysia," MPRA Paper 77232, University Library of Munich, Germany.
    8. de Mendonça, Helder Ferreira & Díaz, Raime Rolando Rodríguez, 2023. "Can ignorance about the interest rate and macroeconomic surprises affect the stock market return? Evidence from a large emerging economy," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    9. Bouzgarrou, Houssam & Ftiti, Zied & Louhichi, Waël & Yousfi, Mohamed, 2023. "What can we learn about the market reaction to macroeconomic surprise? Evidence from the COVID-19 crisis," Research in International Business and Finance, Elsevier, vol. 64(C).
    10. Ahmed Samour, Aliya Zhakanova Isiksal, Turgut Türsoy, 2023. "Effects of the domestic and ECB interest rates on Türkiye's stock market: Empirical evidence from a newly developed combined co-integration and causality analysis," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 20(2), pages 223-238, December.
    11. Thuy Thu Nguyen & Hong Thi Mai & Tram Thi Minh Tran, 2020. "Monetary Policy and Stock Market Returns: Evidence from ARDL Bounds Testing Approach for the Case of Vietnam," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(7), pages 758-777, July.
    12. Nganje, William & Fosu, Prince, 2022. "Risks and risk premiums of GE corn: A macromarketing framework," Ecological Economics, Elsevier, vol. 201(C).
    13. Sanya Ogunsakin & Isaac Tope Awe, 2020. "Macroeconomic Determinants of Stock Market Performance in Nigeria," Business and Economic Research, Macrothink Institute, vol. 10(4), pages 139-158, December.
    14. Taslima Akther & Mushfiqur Rahman & Md. Mufidur Rahman, 2023. "Factors influencing commercial bank profitability in Bangladesh: a panel data approach," Future Business Journal, Springer, vol. 9(1), pages 1-20, December.
    15. Sumit Kumar Maji & Arindam Laha & Debasish Sur, 2020. "Dynamic Nexuses between Macroeconomic Variables and Sectoral Stock Indices: Reflection from Indian Manufacturing Industry," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 45(3), pages 239-269, August.
    16. Mutiu A. Oyinlola & Tirimisyu F. Oloko, 2018. "Exchange rate dynamics and stock market performance in Nigeria: Evidence from a Nonlinear ARDL Approach," Working Papers 059, Centre for Econometric and Allied Research, University of Ibadan.
    17. Godfrey Marozva & Margaret Rutendo Magwedere, 2017. "Macroeconomic Variables, Leverage, Stock Returns and Stock Return Volatility," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(4), pages 264-288, AUGUST.
    18. Sin-Yu Ho, 2019. "The macroeconomic determinants of stock market development in Malaysia: an empirical analysis," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 21(2), pages 174-193.
    19. Shada Almuwallad, 0000. "Exploring the Dynamics: Granger Causality Between Macroeconomic Variables and Sectoral Stock Prices Before and After the 2008 Financial Crisis: Evidence From The FTSE All-Share Index," Proceedings of Economics and Finance Conferences 14416316, International Institute of Social and Economic Sciences.
    20. Ho, Sin-Yu, 2017. "The Macroeconomic Determinants of Stock Market Development: Evidence from South Africa," MPRA Paper 76493, University Library of Munich, Germany.

    More about this item

    Keywords

    ARDL Co-integration; Banking sector; Macroeconomic indicators; Nigerian stock market; Stock price behavior;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2020-02-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.