Macroeconomic Indicators and Stock Price Movement Nexus: A Study of the Nigerian Stock Market

This study explored the nature of the connection existing amongst movements in stock prices and macroeconomic activities in the Nigerian stock market. Different attempt have been made to find the relationship between macro-economic factors and stock prices in several capital markets, necessitating the use of different models. Co integration regression analysis and vector error correction mechanism was used to capture both the short nm dynamics and long nm relationship between the macroeconomic indicators and share prices from 1985-2014 since it captures the pre and post reform adjustment in the long nm. The findings reveal that inflation rate increases in the same direction with share prices which aligns with theoretical expectation which is as a result of investors perceptionthat the stock market have an inflationary hedge in the post structural adjustmentperiod. While exchange rate increases in the same direction as share prices because with a rise in the exchange rate of a cmmtry, the stock prices of the country would become cheap and consequently attractive to Foreign investors. This study recommends that investors should watch the trend of macroeconomic variables fluctuations in order to predict stock price movemen