FOREIGN EXCHANGE RATE DYNAMICS AND STOCK RETURNVOLATILITY IN THE NIGERIAN STOCK EXCHANGE MARKET

Authors

  • Fakunmoju, S. K Accounting & Finance Department, Fountain University, Osogbo, Osun State, Nigeria Author
  • Kasali, R. K , Malik-Abdulmajeed, K. M Accounting & Finance Department, Kwara State University, Malete, Osun State, Nigeria Author

Keywords:

: EGARCH, Foreign Exchange Rate Dynamics, Inflation Rate, Nigerian Stock Market and Stock Return Volatility

Abstract

Stock return volatility plays a vital role in mobilising long term finance for the private and public sectors of any
economy. Despite the exchange rate stability policy by the Central Bank of Nigeria (CBN), the Nigerian Stock
Market still experience high volatile stock return and loss of investors’ confidence. The study examined the effect of
foreign exchange rate dynamics on stock return volatility in the Nigerian Stock Market. E-GARCH was employed
using monthly data sourced from the CBN within the period of January 2008 to March, 2020 for All Share Index, Inflation and Exchange Rates. The study revealed that foreign exchange rate dynamics and inflation rateinversely
affect stock return volatility in the Nigerian Stock Market and recommended that the CBN and other monetary
authorities should employ stringent measures to control overvaluation of foreign currencies against Nigerian local
currency so as totruncate level of volatility in stock return in the Nigerian stock market.

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Published

2025-05-23

Issue

Vol. 1 No. 1 (2020): AJEC

Section

Articles