Get the complete project »
- The Complete Research Material is averagely 55 pages long and it is in Ms Word Format, it has 1-5 Chapters.
- Major Attributes are Abstract, All Chapters, Figures, Appendix, References.
- Study Level: BTech, BSc, BEng, BA, HND, ND or NCE.
- Full Access Fee: ₦4,000
The need to capture stock market and foreign exchange market nexus in Nigeria is underscored by the rapidly expanding financial markets integration due to trade and financial liberalization policies which seem to have enhanced the inflow of capital as well as accelerated investment/business interactions. Theoretically, the relationship between stock prices and exchange rate can be either positive or negative and can also run either way. This study therefore captures returns/mean and volatility spillovers between the stock and foreign exchange markets in Nigeria. The study empirically analyzes stock prices and exchange rate interactions with VAR and multivariate generalized autoregressive conditional heteroscedasticity (GARCH) models using monthly data from January 2000 to October 2014. The results of the E-G and Johansen cointegration test show that there is stable long-term equilibrium relationship between stock prices and exchange rate. The empirical evidence of the VAR-GARCH model shows a significant mean spillover running from stock market to exchange market but not a mean spillover from exchange market to stock market. Furthermore, the variance equation results show that there exist bi-directional volatility transmission effect between the two markets, indicating the past innovations in stock market have the great effect on future volatility in foreign exchange market, and vice versa. The results have important implications for international portfolio managers in the portfolio diversification decisions and risk hedging strategies.
1.1 Background of the Study:
The relationship between stock prices and exchange rate has attracted much attention amongst financial expert, researchers and policy makers in Nigeria since the inception of the Structural Adjustment Programme (SAP) in 1986. The period witnessed significant changes in the Nigerian financial system, such as the emergence of new equity markets in terms of liberalization policy. This era saw the abolishment of trade barriers on capital flows and adoption of flexible exchange rate, which subsequently result to verities of investment opportunities. Hence, the broadened investment opportunities in turn promote frequent inflow and outflow of investment into the market. As a result, this has led to the increase in demand and supply for local currency and thus, the volatility in exchange rates that sometime affect the investment decisions and portfolio diversification of many investors.
However, the understanding of the influence of exchange rates on stock prices and their interactions in Nigeria cannot be over-emphasis. This is because of the significant role they play in stabilizing the macroeconomic environment, which in turn spur economic growth and development. Though, there has been thoughtful disagreement on the relationship between stock prices and exchange rate. It has been argued that the interplay of demand and supply of domestic currency partly determined stock price movement (Bahmani-Oskooee & Sohrabian, 1992). But this idea has been refuted by some scholars who believed that rise or fall in stock prices play a significant role in demand and supply of domestic currencies (Stavarek, 2005; Pan, Fok, & Lin, 2007). Thus, an appreciation of stock prices translates to the effectiveness of the market in terms of its performance. Therefore, an efficient market always attracts reasonable number of domestic and foreign investors. However, the inflows of foreign investors into the market due to its performance, causes increase in demand and supply of domestic currency.
You either get what you want or your money back. T&C Apply
You can find more project topics easily, just search
SIMILAR ECONOMICS FINAL YEAR PROJECT RESEARCH TOPICS
» CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY Nigeria, like many other countries hold Foreign Exchange Reserve at what is perceived a favourabl...Continue Reading »
» ABSTRACT This study aims at evaluating the oil sector vis a vis the agricultural sector in Nigeria from 1981 2007. The role of agriculture in the Nige...Continue Reading »
3. AN ECONOMIC ANALYSIS OF QUALITY OF LIFE AND LIVING CONDITIONS IN ZARIA LOCAL GOVERNMENT AREA OF KADUNA STATE» ABSTRACT Recent measures of welfare tend to go beyond the conventional focus on resources to a wide range of other aspects due to the multidimensional...Continue Reading »
» CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY Nigeria as a nation has the vision of becoming one among the world’s 20 largest economies i...Continue Reading »
» CHAPTER ONE INTRODUCTION Background of Study The maritime industry includes all enterprises engaged in the business of designing, constructing, manufa...Continue Reading »
6. ECONOMIC IMPACT OF COOPERATIVE IN NEPAL (A CASE STUTY OF KIRTIPUR MULTIPURPOSE COOPERATIVE LIMITED)» CHAPTER I INTRODUCTION 1.1 Background of the Study Nepal is youngest republican country in the world. By the political change in the country, many thi...Continue Reading »
» ABSTRACT vii Nigeria's fiscal operations since early 1980's have resulted into persistent and huge fiscal deficit. This is attributed to revenue short...Continue Reading »
» ABSTRACT What if the transportation section is stagnant, almost every section of any given economy will not perform well as expected. The importance o...Continue Reading »
» (A CASE STUDY OF HARDIS AND DRONES EMENE ENUGU)CHAPTER ONEINTRODUCTION1.1 BACKGROUND OF THE STUDY Small scale industries have been in existence since ...Continue Reading »
» CHAPTER ONE BACKGROUND OF THE STUDY . . 1.0 INTRODUCTION Taxation can simply be seen as a compulsory transfer or payment of money from private individ...Continue Reading »