STOCK MARKET CAPITALIZATION AND INTEREST RATE IN NIGERIA: A TIME SERIES ANALYSIS
ABSTRACT
This study examines the relationship between stock market capitalization rate and interest rate. Time series data obtained from Central Bank of Nigeria (CBN) and Nigerian Stock Exchange (NSE) were analyzed using simple linear regression. Results showed that the prevailing interest rate exerts positive influence on stock market capitalization rate. Government development stock rate exerts negative influence on stock market capitalization rate and prevailing interest rate exerts negative influence on government development stock. It was therefore recommended that the operators of the Nigeria capital market should raise the level of awareness so that investors will be abreast with the happening in the market.
CHAPTER ONE
Introduction
1.1 Background Of The Study
It is a known fact that the investment that promote economic growth and development requires long-term funding, or longer than the duration for which most savers are willing to commit their funds. Capital market is a collection of financial institutions set up for the granting of medium and long term loans. Government securities corporate bonds are also traded here in the market, investors provides long-term funds in a bid to secure long term financial assets offered by borrowers. The capital market is made up of two (2) types of market: the primary and secondary market.
The participants in the capital include: Nigerian Stock Exchange, Discount Houses, Development Banks, Investment Banks, Buildings Societies, Stock Broking Firms, Insurance and Pension Organization quoted firms, the government, individuals and the Nigerian Stock Exchange (NSE) savings and real investment is therefore encouraged through the operations of the capital market. This is because aggregate savings are channeled into real investment that increases capital stock and therefore economic growth of the country.
Capitalization rate is the discount rate used to determine the present value of future earnings. It is one of the major determinants of the market size of any stock exchange. The determination of this rate is based on the forces of demand and supply: interest rate is a part of the monetary policy. If interest’s rate paid by banks to depositor is increased, investors will patronize the banks the more and fewer investors will invest on the capital market. This will lead to a decrease in capital investment in the economy and hence economic growth and development will be lowered.
Thus, the disparity in the determination of interest rate and capital rate by different forces must have influence on the development and growth of the economy. These influences constitute the major problem that this study intends to investigate. The variation in the interest rate might cause investors also to either go to bank or buy government development stock (bond) thereby helping in the development of the economy.
1.2 Statement Of The Research Problem/ Question
This research will direct itself towards providing answers to the following questions.
- Is there any significant relationship between interest rate and stock market capitalization rate?
- Is there any significant relationship between government development stock rate and stock market capitalization rate?
- Is there any significant relationship between interest rate and government development stock?
1.3 Objectives Of The Study
This research is committed to establishing the relationship that exists between prevailing interest rate, stock market capitalization and government development stock rate. Specifically, the following are the objective of the study:
- To identify the type of relationship that exists between interest rate and stock market capitalization rate.
- To critically examine the relationship between government stock rate and stock market capitalization rate
- To examine the relationship between interest rate and government development stock rate.
1.4 Significance Of The Study
The Nigerian stock market constitutes a vital organ of our modern socio-economic system, is characterized by large-scale production requiring huge capital. The study hopes to contribute to the wealth of knowledge and enlighten interested and relevant stakeholder on the significant relationship between interest rate, stock market capitalization rate and government development stock. By the end of this study, it is hoped that all participants in the stock market will appreciate the relevance of prevailing interest rate on stock market capitalization as well as government development stocks.
1.5 Hypotheses Of Study
For the purpose of resolving the research problems and questions articulated above the following hypotheses are formulated and will be tested in the course of this study.
- H0: There is no positive relationship between stock market capitalization rate and prevailing interest rate.
H1: There is a positive relationship between stock market capitalization rate and prevailing interest rate. - H0: There is no positive relationship between stock market capitalization rate and government development stock rate.
H1: There is positive relationship between stock market capitalization rate and development stock market rate. - H0: There is no positive relationship between government development stock rate and prevailing interest rate.
H1: There is positive relationship between government stock market capitalization and prevailing interest rate.
1.6 Scope Of The Study
This study employs a time series analysis to examine the effect of interest rate on other variables such as stock market capitalization rate and government development stock rate obtained from 1999-2008 and from Nigeria.
CHAPTER TWO
2.0 Literature Review
2.1 Introduction
The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …
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TABLE OF CONTENTSPRELIMINARY PAGES
- Title page
- Approval page
- Dedication
- Acknowledgement
- Table of Contents
- Abstract
INTRODUCTION
- 1.1 Background …
- ⋮
LITERATURE REVIEW
- 2.1 Introduction
- 2.2 Conceptual Review
- 2.3 Theoretical Framework
- ⋮
- 2.4 Empirical Studies
- 2.5 Research Gaps
- 2.6 Summary of Literature Review
CHAPTER THREE
RESEARCH METHODOLOGY
- 3.1 Introduction
- 3.2 Research Design
- 3.3 Population of Study
- 3.4 Sampling and Sampling Technique
- 3.5 Validation of Research Instrument
- 3.6 Method of Data Collection
- 3.7 Method of Data Analysis
- 3.8 Questionnaire Administration
- 3.9 Ethical Consideration
- 3.10 Statistical Analysis
CHAPTER FOUR
DATA ANALYSIS, RESULT AND DISCUSSION
- 4.1 Introduction
- 4.2 Presentation and Analysis of Data
- 4.3 Re-statement of Research Questions
- 4.4 Test of Hypotheses
- 4.5 Discussion of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
- 5.1 Introduction
- 5.2 Summary of Findings
- 5.3 Conclusion
- 5.4 Recommendation
- 5.5 Suggestion for Further Study
REFERENCES
APPENDIX A - “QUESTIONNAIRE”
Disclaimer for Complete Material Utilization
The displayed research work titled "Stock Market Capitalization and Interest Rate in Nigeria: A Time Series Analysis" is stated as a research guideline towards accomplishing your assigned project / seminar research work. All the research materials on this website are ONLY for research purposes and should be used as a guideline in developing your research work. For no reason should you copy word for word as projectlist.com.ng will not be liable for any who copied the material. By ordering the complete research guideline, it signifies that you've accepted our terms of service.
PRELIMINARY PAGES
- Title page
- Approval page
- Dedication
- Acknowledgement
- Table of Contents
- Abstract
INTRODUCTION
- 1.1 Background …
- ⋮
LITERATURE REVIEW
- 2.1 Introduction
- 2.2 Conceptual Review
- 2.3 Theoretical Framework
- ⋮
- 2.4 Empirical Studies
- 2.5 Research Gaps
- 2.6 Summary of Literature Review
CHAPTER THREE
RESEARCH METHODOLOGY
- 3.1 Introduction
- 3.2 Research Design
- 3.3 Population of Study
- 3.4 Sampling and Sampling Technique
- 3.5 Validation of Research Instrument
- 3.6 Method of Data Collection
- 3.7 Method of Data Analysis
- 3.8 Questionnaire Administration
- 3.9 Ethical Consideration
- 3.10 Statistical Analysis
CHAPTER FOUR
DATA ANALYSIS, RESULT AND DISCUSSION
- 4.1 Introduction
- 4.2 Presentation and Analysis of Data
- 4.3 Re-statement of Research Questions
- 4.4 Test of Hypotheses
- 4.5 Discussion of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
- 5.1 Introduction
- 5.2 Summary of Findings
- 5.3 Conclusion
- 5.4 Recommendation
- 5.5 Suggestion for Further Study
REFERENCES
APPENDIX A - “QUESTIONNAIRE”
Disclaimer for Complete Material Utilization
The displayed research work titled "Stock Market Capitalization and Interest Rate in Nigeria: A Time Series Analysis" is stated as a research guideline towards accomplishing your assigned project / seminar research work. All the research materials on this website are ONLY for research purposes and should be used as a guideline in developing your research work. For no reason should you copy word for word as projectlist.com.ng will not be liable for any who copied the material. By ordering the complete research guideline, it signifies that you've accepted our terms of service.
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