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FOREIGN PORTFOLIO INVESTMENT AND STOCK MARKET RETURNS IN NIGERIA
Abstract: Foreign portfolio investment is an investment model where investors seek returns in foreign countries without any control over the firms. The study made use of Ordinary Least Square and Auto Regressive Distributed Lag (ARDL) model which uses a bound test approach based on unrestricted error correction model (UECM) to measure the impact of Foreign Portfolio Investment on Stock Market Returns in Nigeria. The data was from the Central Bank of Nigeria Statistical Bulletin, for the period 986 to 2017. The variables used in the analysis are stock market capitalization used for stock market returns (dependent variable), while foreign portfolio investment, exchange rate, and interest rates were used as independent variables. The coefficients of exchange rate and FPI are positive which implies that any change in the variables will change the stock market returns in Nigeria. The interest rate has negative and as well no significant influence on the stock market return. The results show that there is no long run relationship between foreign portfolio investment and stock market returns in Nigeria. It was recommended that government and private individuals should provide enabling business environment that will encourage foreign portfolio investors’ savings to enhance stock market development.
Key words: Stock Market Returns, Investment, Foreign Portfolio Investment, Exchange Rate, Interest Rate.