A weighted least squares analysis of globalization and the Nigerian stock market performance
Keywords:Globalization, Performance, Stock market, Weighted least squares.
AbstractThe study empirically investigates the impact of globalization on the performance of the Nigerian Stock market. The study seeks the verification of the existence of a linking mechanism between globalization through trade openness, net inflow of capital, participation in international capital market and financial development on Stock Market performance over the period of 1981 to 2011. The methodology adopted examines the stochastic characteristics of each time series by testing their stationarity using the Im, Pesaran and Shin W-stat test. The weighted least squares regression method was employed to ascertain the different level of impacts on the above subject matter. The findings were reinforced by the presence of a long-term equilibrium relationship, as evidenced by the cointegrating equation of the VECM. The Model ascertained that globalization variables actually positively impacted on stock market performance. However, the findings reveal that while net capital inflows and participation in international capital market have greater impact on the Nigerian Stock market performance during the period under review. Accordingly, it is advised that in formulating foreign policy, policy makers should take strategic views on the international economy and make new creative policies that will foster economic integration between Nigeria and its existing trade allies. These creative policies will also assist to create avenues for the making new trade agreements with other nations of the world, which hitherto were not trade partners with Nigeria.
Adegbite, E. and O. Babatunde (2010), “Global Economic crises and the Nigerian Economy: The Transmission Mechanism”, Paper Presentation at the Third Annual Conference of Department of Finance, University of Lagos
Aggarwal, R., C. Inclan and R.P.C. Leal (1999), ‘Volatility in Emerging Stock Market’, Journal of Financial and Quantitative Analysis, Vol. 34, No. 1, pp.33-55
Aigheyisi, O.S and J.Ovuefeyen (2013), “Foreign Financial Resources Inflows and Stock Market Development: Empirical Evidence from Nigeria and Ghana”, Research Journal of Finance and Accounting, Vol.4, No.9, pp. 48
Augusto, De la, A. Torre and S. Schmukler (2006), "Emerging Capital Markets and Globalization: The Latin American Experience", Stanford University Press, Palo Alto, and the World Bank, Washington, DC.
Cox, W. (2008), Root Causes of the Financial Crisis: A Primer. New Geography
Dickey, D.A. and W. Fuller (1981) "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root", Econometrica, Vol.49, pp.1057-1072
Dollar, D. and A. Kraay (2004), "Trade, Growth, and Poverty", The Economic Journal, Vol.114, No.127, pp. F22-F49.
Durham, J. and B.J. Benson (2008), Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth, European Economic Review, Vol:48, pp:285-306
ECA, (2008), The Global financial crisis: Impact, role and response of The Economic Commission for Africa (ECA)
Edu, David et all, (2011), “Globalisation and its Implications for Education in Nigeria”, Mediterranean Journal of Social Sciences, Vol. 2, No. 3, September 2011, ISSN 2039-2117
Feridun, Mete, O. Janet and F, Benjamin, (2006), “Analysing the impact of Globalisation on Economic Development in Developing Economies: An application of Error Correction Modelling (ECM) to Nigeria”, Applied Econometrics and International Development, Vol. 6-2
Fischer, Bernhard, (1998) "Globalisation and the Competitiveness of Regional Blocs" Intereconomics, Review of International Trade and Development, Hamburg Institute of Economic Research (HWWA) Volume 33, pp. 164-170.
Fitzgerald, E.B. (2000), "Globalization: Economic Development's Best Friend", The PacNet Newsletter.
Giddens, A. (1990), Consequences of Modernity, Polity Press, Cambridge
Granger, C.W.J. and R.F. Engle, (1987), ‘’Co-integration and Error Correction Representations, Estimation and Testing,” Econometrica, Vol. , pp.251-276
Gujarati, D. N and Sangeetha (2007), Basic econometrics, Fourth Edition, Tata McGraw-Hill Publishing
Husain, F. and A. Qayyum (2006), Stock Market Liberalisations in the South Asian Region., PIDE Working Paper No. 06.
Inanga, I. L. and C. Emenuga (1997), “Institutional, Traditional and Asset Pricing Characteristics of the Nigerian Stock Exchange”, African Economic Research Consortium International Monetary Fund (1 997) "Globalisation, Opportunities and Challenges" World Economic Outlook, May.
Issing, O. (2000), “The globalisation of financial markets” European Central Bank, Directorate Communications, Kaiserstrasse 29, D-60311 Frankfurt am Main
Joseph E. S. (2002), Globalization and Its Discontents New York: Norton & Company,
Kavita, G. and G. Rakesh (2011) “Impact of globalisation on stock market development in India” Delhi business review vol. 12, no. 1, pp. 69-84, 0972-222X, Society for Human Transformation & Research.
Levine, R. and S. Schmukle (2006a and 2006b), "Migration, spillovers, and trade diversion: The impact of internationalization on domestic stock market liquidity". Journal of Banking & Finance, 10, 153-187. 26
Mbamali, I and A.J. Okotie (2003), “An Assessment of the Threats and Opportunities of Globalisation on Building Practice in Nigeria”, American International Journal of Contemporary Research
Mercereau, B. (2004), “The Role of Stock Markets in Current Account Dynamics: a Time-Series Approach” Asia Pacific Department, IMF Working Paper
Monge, P. R. (1998), Communication theory for a globalizing world, In J. S. Trent (Ed.),
Nyong, M. O. (1997), “Capital Market Development and Long-run Economic Growth: Theory, Evidence and Analysis” First Bank Review, December 1997: 13-38.
Omah and Ishmael (2010), “Globalisation: Emerging Trend in Nigerian Capital Market Operation”, European Scientific Journal, May Ed. Vol.8, No.9.
Scholte, J. A. (1996), Beyond the buzzword: Toward a critical theory of globalization.
Tony, O.E. (2012), “Annual Report of Transcorp PLC for the year ended Dec., 31st 2011.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) after official publication, as it can lead to productive exchanges as well as greater citation of published work (See The Effect of Open Access).