Share Price Volatility and Economic Growth

Share Price Volatility and Economic Growth

ABSTRACT

This research work was conducted to ascertain the effect of share price volatility on the economic growth of Nigeria. A unit increase in the all-share index would lead to a 0.72 units increase in the gross domestic product but is also statistically insignificant.

The research used series of test such as the unit root test that was used to test for stationary, the co-integration test was used to check for the long run and short-run relationship between the variables, and the error correction model that estimates the speed at which a dependent variable returns to equilibrium after a change in other variables.

The augmented ADF test of stationary shows that all the variables are not stationary at levels but are stationary at the first difference at the 0.05 level of significance,

The long-run equation reveals that all the variables in the model met a priori expectation, in the long run, The all share price index growth rate shows a direct relationship with economic growth in Nigeria but is statistically insignificant as shown by its high standard error.

INTRODUCTION

The origins of the Nigerian Capital Market date back to colonial times when the British Government ruling Nigeria at the time sought funds for running the local administration. Most of these funds derived from agriculture, produce marketing and solid mineral mining.

Discovering that these sources were inadequate to meet its growing financial obligations, the colonial administration decided to expand its revenue base by reforming the system of revenue mobilization, taxation and other payments.

It also saw the need to raise funds from the public sector to cover temporary shortfalls in funds availability. Hence, it found it necessary to establish a financial system by setting up the basic infrastructure for its take-off pending the development of an organized private sector.

According to Odife (2000), the first step in this direction was to secure the necessary finance for the development of this infrastructure and long-term capital project.

This it did in 1946 when it promulgated the 1946 10-year plan Local Loan Ordinance for the floatation of the first N300,000, 3% Government stock 1956/61 with its management vested on the Accountant.

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