RESPONSIVENESS OF STOCK MARKET RETURN TO MACROECONOMIC POLICIES IN NIGERIA: AN EMPIRICAL REVIEW

This study examined the responsiveness of stock market to macroeconomic policies in Nigeria. In a market economy, the role of the stock market is very important. A well-functioning stock market assists the development process in an economy through boosting of savings and allowing for a more efficient allocation of resources. The general purpose of this study is to ascertain the response of stock market to macroeconomic policies. The study adopted a descriptive research design and data were sourced from secondary sources. To empirically ascertain the response of the stock market to macroeconomic policies; the study adopted the vector error correction model (VECM) in analyzing the data. Based on the analysis conducted, the unit root test result showed that there is a long-term relationship between macroeconomic variables and stock market; and the normalized co-integrating relationship showed the presence of more than one co-integrating relationship agreeing with the unrestricted co-integration rank test. Therefore, the results obtained indicate that the Nigerian stock market is responsive to macroeconomic variables. Thus, the study concludes that the stock market is responsive to macroeconomic variables at 5% level of significance. The study therefore recommends that investors in the stock market should monitor the trend of macroeconomic variables in taking investment decisions.