The Journal of Accounting and Management, Vol 7, No 1 (2017)

A Causality Test of the Impact of Macroeconomic Factors on Firms’ Shares Returns in Nigeria.

Michael Segun Ogunmuyiwa



Macroeconomic determinants of firm share returns had been a subject of debate among scholars. While the debate rages on, this study investigates the causal relationship between macroeconomic factors and firm share returns in Nigeria by taking a sample of fifty (50) quoted firms on the Nigeria Stock Exchange from January 2007 to December 2013. The monthly time series and cross sectional data was fitted to the Granger causality test and the results affirm that except money supply all other macroeconomic variables (inflation rate, interest rate, exchange rate and crude oil price) exhibit uni-directional causality with firm share returns and bi-directional causality with respect to the other three factors. The study recommends that to improve portfolio performance, investors in the Nigeria stock market need to be cognizant of the impacts of macroeconomic indicators particularly those that have been found to be causally related to stock returns like inflation rate, interest rate, exchange rate and crude oil price.


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