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ABSTRACT
This study empirically examined the asymmetric effect of macroeconomic news on stock market returns and volatility in Nigeria. The study used monthly time series data on exchange rate, crude oil prices, inflation rates and monetary policy rates and stock prices covering the period January 2005 to December 2020. The study employed an ex-post facto research design using secondary data collected on companies listed on Nigerian Exchange Group, from Statistical Bulletin of the Central Bank of Nigeria, World Bank data indicators, and the National Bureau of Statistics. The descriptive statistics, and Glosten, Jagannathan and Runkle Generalized Autoregressive Conditional Heteroscedastic model (GJR-GARCH) were employed to analyze the parameters. 12 The study revealed that crude oil price and exchange rate have positive asymmetric effect on stock return but positive symmetric effect on stock volatility. This indicates that the responses of stock return to bad news on crude oil price and exchange rate are very low compared to the response of the stock return to good news on crude oil price and exchange rate. In addition, the study found that inflation rate has positive asymmetric effect on stock return and stock volatility. This shows that effect of bad news of inflation rate on stock return and volatility variation is very low compared to good news on inflation rate effect on stock return and volatility which has larger effect on stock return and volatility. On the other hand, the study documented that monetary policy rate has positive symmetric effect on stock return but positive asymmetric effect on stock volatility. This implies that effect of bad news of inflation rate on stock return and volatility variation is very low compared to good news on inflation rate. The study concluded that there is presence of asymmetric effect of macroeconomic news on stock market return and volatility in Nigeria. More so, it was concluded that the proposition of efficient market hypothesis that investors cannot make abnormal returns does not hold in the Nigerian stock market. This is because the arrival of bad or good news influences the return and volatility and it signifies that the market is informationally inefficient. Furthermore, the presence of the asymmetric effect influences the return and volatility and this refutes the assumption of random walk hypothesis. The study recommends the establishment of electronically based special news portal dedicated to delivering information on daily happenings about quoted companies and other stock market activities will reduce the asymmetry effect of the macroeconomic variables on stock.
