Impact of Macroeconomic Factors on Common Stock Returns: A Study of Listed Manufacturing Firms in Nigeria

Abstract

This paper examines the impact of macroeconomic factors on common stock returns of the manufacturing firms listed on the Nigerian Stock Exchange. The data for the study was generated from ten firms using stratified sampling technique. The study period was 1991 to 2003. Multiple regressions were used in examining the relationships between the dependent and independent variables of the study. Pearson Movement Correlation was used for assessing the magnitude and the direction of the relationships between/and among the variables of the study. Among the major findings of the study was that non of the four independent variables (inflation rate, interest rate, exchange rate of domestic currency and gross national income) examined in the hypotheses testing, on an individual basis, has significant impact on the common stock returns of the sampled firms. Among the recommendations made by the paper were the diversification of the productive sectors of the Nigerian economy and the internationalization of the nation’s capital market.

Keywords: Common stock returns, Macroeconomic factors