Impact of Gdp on Stock Market
International Research Journal of Finance and Economics ISSN 1450-2887 Issue 25 (2009) © EuroJournals Publishing, Inc. 2009 http://www.eurojournals.com/finance.htm
An Impact Analysis of Real Gross Domestic Product Inflation and Interest Rates on Stock Prices of Quoted Companies in Nigeria
Daferighe. Emmanuel E Lecturer, Department of Accounting, Faculty of Management Sciences Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Nigeria E-mail: daferighe2e@yahoo.com Tel: +234-805-5218-253 Aje. Samuel O Lecturer, Department of Accounting, Faculty of Management Sciences Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Nigeria Tel: +234-803-7173-900 Abstract Market reacts differently to various factors ranging from economic political, and socio-cultural. The stock prices of quoted companies in Nigeria are affected either positivity or negatively by a number of factors occurring within or without the economic system. The paper examines the impact of Real Gross Domestic Product (RGDP), Interest Rate (INT) and Inflation Rate (INF) on stock prices of quoted companies in Nigeria from 1997 – 2006. Stock prices were represented by Stock Market Value Index in the model, which is SMVI = α0 + α1 INT + α2 INF + α3 RGDP + u. A regression analysis showed that the explanatory variables accounted for 95.6% of the variation in stock prices. While a reduction in interest and inflation rate resulted in increased stock prices, increased RDGP has a positive impact. Government should therefore implement policies that will reduce inflation rate and improve the standard of living of its citizens. Interest rate should be made moderate so as to encourage investment and transactions in stock. Keywords: Stock prices, Real Gross Domestic Product, Interest rate, Inflation rate, Market information.
Introduction
No economic activity operates in a vacuum. Market reacts promptly and uncharacteristically to rumours of war, changes in regulatory environment; political climate seen as a
An Impact Analysis of Real Gross Domestic Product Inflation and Interest Rates on Stock Prices of Quoted Companies in Nigeria
Daferighe. Emmanuel E Lecturer, Department of Accounting, Faculty of Management Sciences Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Nigeria E-mail: daferighe2e@yahoo.com Tel: +234-805-5218-253 Aje. Samuel O Lecturer, Department of Accounting, Faculty of Management Sciences Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Nigeria Tel: +234-803-7173-900 Abstract Market reacts differently to various factors ranging from economic political, and socio-cultural. The stock prices of quoted companies in Nigeria are affected either positivity or negatively by a number of factors occurring within or without the economic system. The paper examines the impact of Real Gross Domestic Product (RGDP), Interest Rate (INT) and Inflation Rate (INF) on stock prices of quoted companies in Nigeria from 1997 – 2006. Stock prices were represented by Stock Market Value Index in the model, which is SMVI = α0 + α1 INT + α2 INF + α3 RGDP + u. A regression analysis showed that the explanatory variables accounted for 95.6% of the variation in stock prices. While a reduction in interest and inflation rate resulted in increased stock prices, increased RDGP has a positive impact. Government should therefore implement policies that will reduce inflation rate and improve the standard of living of its citizens. Interest rate should be made moderate so as to encourage investment and transactions in stock. Keywords: Stock prices, Real Gross Domestic Product, Interest rate, Inflation rate, Market information.
Introduction
No economic activity operates in a vacuum. Market reacts promptly and uncharacteristically to rumours of war, changes in regulatory environment; political climate seen as a
References: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] International Research Journal of Finance and Economics - Issue 25 (2009) International Research Journal of Finance and Economics - Issue 25 (2009) Sum of Squares 8.28E+08 24887435 8.53E+08 df 3 6 9 Mean Square 275892224.6 4147905.761 F 66.514 Sig