FOREIGN PRIVATE INVESTMENT AND STOCK MARKET VOLATILITY IN NIGERIA
- Ifuero Osad Osamwonyi
- Nosakhare Ikponmwosa
- ( paper pages. 1 - 15 )
Abstract
This study investigates the dynamic relationship between Foreign PrivateInvestment (FPRI) and Stock Market volatility in Nigeria, using quarterly timeseries data from 1985 to 2013. FPRI was decomposed into Foreign PortfolioInvestment (FPI) and Foreign Direct Investment (FDI). After the preliminarystationarity test of the data series, the Granger causality test procedure wasemployed, and finally a GARCH process was used to determine the magnitudeof impact of foreign capital flows on stock market volatility in Nigeria. Theresult from the Granger causality (dynamics) analysis reveals a unidirectionalrelationship running from FPI to stock market volatility, while FDI is found tohave a feedback relationship with stock market volatility in Nigeria. TheGARCH result reveals that FPI contributes to stock market volatility, whileFDI helps to promote stability in the capital market. Against the backdrop ofthese findings, it is recommended that policy measures to stimulate andstabilize foreign private investment, particularly FPI be put in place in order toensure the stability and growth of the stock market. Importantly, soundinstitutional and regulatory mechanisms, as well as stable macroeconomicpolicy environment are imperative to engendering market resilience duringshocks, and the repositioning of the financial market as a pivot for domesticinvestment and rapid economic growth.
Citation
Ifuero Osad Osamwonyi, Nosakhare Ikponmwosa.
2018.
"FOREIGN PRIVATE INVESTMENT AND STOCK MARKET VOLATILITY IN NIGERIA"
The Nigerian Journal of Economic and Social Studies,
60 (2): 1 - 15.
JEL Classification
C32, F21, G12
