TO GET THE COMPLETE JOURNAL/THESIS FOR TOPIC BELOW,
CALL: 08168759420, 08068231953
WHATSAPP: 08137701720
THE LINKAGE BETWEEN THE DEPTH OF DEVELOPMENT IN NIGERIAN STOCK MARKET AND ECONOMIC GROWTH: A JOHANSEN CO-INTEGRATION APPROACH (1981–2015)
ABSTRACT
This study explored the casual linkage between the depth of development in Nigerian stock market and economic growth as well as the short-run and long-run dynamics of the stock market. We used annual data of growth rate of gross domestic product (GRGDP) at current market price, stock market capitalisation and value of stock traded ratio to gross domestic product from 1981 to 2015. The data were sourced from Nigerian Stock Exchange fact book of various issues and Nigeria Bureau of Statistics. Prior to estimation, the models were subject to diagnostic test such as heteroscekasticity, normality and multicollinearity test. The results of augmented Dickey-Fuller (ADF) and Phillips Perron (PP) and tests revealed that the variables are integrated of order one. The results of Granger causality test show that there is no causal linkage between depth of development in Nigerian stock market and economic growth at 5% level of significance. The Johansen co-integration test showed that there is a long-run linkage between depth of development in Nigerian stock market represented by market capitalisation and value of stock traded ratio to gross domestic product (GDP) and economic growth reflected by growth rate of GDP at 5% level of significance. The results of error correction model (ECM) indicates that once the GRGDP and market capitalisation ratio (or value of stock traded ratio) deviates away from the long-run equilibrium, then GRGDP makes all adjustment to restore the long-run equilibrium by correcting disequilibrium by about a factor of 1.25 (or 1.21). The result of this study provides evidence of the existence of a long-run relationship between depth of development in Nigerian stock market and economic growth. However, depth of development in Nigerian stock market does not propel economic growth neither does economic growth stimulate depth of development in Nigerian stock market. This study contributes to existing literature on the long-run significant relationship between stock market development and economic growth in the context of Nigeria.
KEYWORDS stock market development depth, economic growth, Johansen co-integration, short and long-run dynamics