Econometrics test of Arbitrage Pricing and its Volatility in the Nigerian Equities Market
David Umoru & Samuel Iweriebor
Department of Economics, Faculty of Arts, Mgt. & Social Sciences, Edo University, Iyamho
Department of Economics, College of Education, Agbor Delta State
E-mail: david.umoru@yahoo.com
Corresponding Author: David Umoru
ABSTRACT
The study is an empirical test of validity of arbitrage pricing theory (APT) in Nigerian Stock Exchange Market (NSEM) and its volatility for the sample period of 2010 to 2014 using quarterly data on forty-two stocks listed in NSE. Using the EGARCH model, GLS and the fixed effect panel data estimator with cross section specific coefficients, the study validates the APT for NSEM. The policy implication is such that the study upholds the APT theory for NSEM. Results show money supply had significant positive outcome on stock return; Treasury bill with inflation rates had significant negative outcome on return of NSEM. Above all, a significant EGARCH effect was found with indication of harmful market volatility on stock return. This indeed validates that Nigerian stock exchange is vulnerable to instability in the market. The study so recommends the need for stock investors to be cognizant of trend of both domestic macroeconomic fundamentals.
Keywords: APT, Volatility, Nigerian Stock Exchange Market (NSEM)JEL Classification: A38, D26, F45
