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Abstract
This study examined Market Risk Factors (MRFs) influence on stock market returns (SMR) in Nigeria Exchange Limited. Monthly time series data were sourced from 1985 to 2022. Preliminary test of descriptive statistics, Pearson correlation analysis, Augmented Dickey Fuller unit root test were carried out. General Autoregressive Conditional Heteroscedasticity (GARCH 1:1) is used to extract the volatilities of the macroeconomic variables at levels; thereby, converting them to systemic risks variables. The ARDL and ECM framework was used to ascertain the short and long-run effect of MRFs considered on SMR in Nigeria.
Findings show that previous values of SMR considered in the model significantly impact current SMR performance in Nigeria. Crude oil price risk has homogenous significant inverse impact on SMR in Nigeria markets. The Nigeria exchange limited is immune to market risk in the short-run. Only oil price risk and exchange rate risk significantly reduce SMR in Nigeria in the long-run. From the foregoing analysis, this study concludes that market risk factors are significant determinants of SMR in the Nigeria bourse on a monthly basis.
