ABSTRACT
This study examines the relationship between stock market
capitalization rate and interest rate. Time series data obtained from Central
Bank of Nigeria (CBN) and Nigerian Stock Exchange (NSE) were analyzed using
simple linear regression. Results showed that the prevailing interest rate
exerts positive influence on stock market capitalization rate. Government
development stock rate exerts negative influence on stock market capitalization
rate and prevailing interest rate exerts negative influence on government
development stock. It was therefore recommended that the operators of the
Nigeria capital market should raise the level of awareness so that investors
will be abreast with the happening in the market.
CHAPTER ONE
Introduction
1.1 Background of the Study
1.2 Statement of the Research Problem/Questions
1.3 Objectives of the Study
1.4 Significance of the Study
1.5 Hypotheses of Study
1.6 Scope of the Study
1.7 Limitation of the Study
CHAPTER
TWO: LITERATURE
REVIEW AND CONCEPTUAL FRAMEWORK
2.1 Concept of Stock and Stock Price
2.2 The History of Stock Exchange
2.3 The Nigerian Stock Exchange
2.4 The Market Price Mechanism
2.4.1 The Review of Money Market and Capital Market
2.5 The Stock Exchange and the Capital Market
2.6 The Role of Government in the Capital Market
2.7 Stock Market Efficiency: The Nigerian
Experience
2.8 Random Walk Hypothesis and Market Efficiency
CHAPTER THREE: METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Sources of Data
3.4 Model Specification
CHAPTER FOUR: DATA ANALYSIS AND
INTERPRETATION
4.1 Introduction
4.2 Presentation of the Estimated Result
CHAPTER
FIVE: SUMMARY,
RECOMMENDATIONS AND CONCLUSION
5.0 Introduction
5.1 Summary of Findings
5.2 Recommendation
5.3 Conclusion
Bibliography
Appendix
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
It is a known fact that the investment that promote economic
growth and development requires long-term funding, or longer than the duration
for which most savers are willing to commit their funds. Capital market is a
collection of financial institutions set up for the granting of medium and long
term loans. Government securities corporate bonds are also traded here in the
market, investors provides long-term funds in a bid to secure long term
financial assets offered by borrowers. The capital market is made up of two (2)
types of market: the primary and secondary market.
The participants in the
capital include: Nigerian Stock Exchange, Discount Houses, Development Banks,
Investment Banks, Buildings Societies, Stock Broking Firms, Insurance and Pension
Organization quoted firms, the government, individuals and the Nigerian Stock
Exchange (NSE) savings and real investment is therefore encouraged through the
operations of the capital market. This is because aggregate savings are
channeled into real investment that increases capital stock and therefore
economic growth of the country.
Capitalization rate is the discount rate used to determine the
present value of future earnings. It is one of the major determinants of the
market size of any stock exchange. The determination of this rate is based on
the forces of demand and supply: interest rate is a part of the monetary
policy. If interest’s rate paid by banks to depositor is increased, investors
will patronize the banks the more and fewer investors will invest on the
capital market. This will lead to a decrease in capital investment in the
economy and hence economic growth and development will be lowered.
Thus, the disparity in the determination of interest rate and
capital rate by different forces must have influence on the development and
growth of the economy. These influences constitute the major problem that this
study intends to investigate. The variation in the interest rate might
cause investors also to either go to bank or buy government development stock
(bond) thereby helping in the development of the economy.
1.2 STATEMENT OF THE RESEARCH PROBLEM/ QUESTION
This research will direct itself towards providing answers to the
following questions.
1. Is there any significant relationship between
interest rate and stock market capitalization rate?
2. Is there any significant relationship between
government development stock rate and stock market capitalization rate?
3. Is there any significant relationship between interest
rate and government development stock?
1.3 OBJECTIVES OF THE STUDY
This research is committed to establishing the relationship that
exists between prevailing interest rate, stock market capitalization and
government development stock rate. Specifically, the following are the
objective of the study:
1. To identify the type of relationship that exists
between interest rate and stock market capitalization rate.
2. To critically examine the relationship between
government stock rate and stock market capitalization rate
3. To examine the relationship between interest
rate and government development stock rate.
1.4 SIGNIFICANCE OF THE STUDY
The Nigerian stock
market constitutes a vital organ of our modern socio-economic system, is
characterized by large-scale production requiring huge capital. The study hopes
to contribute to the wealth of knowledge and enlighten interested and relevant
stakeholder on the significant relationship between interest rate, stock market
capitalization rate and government development stock. By the end of this study,
it is hoped that all participants in the stock market will appreciate the
relevance of prevailing interest rate on stock market capitalization as well as
government development stocks.
1.5 HYPOTHESES OF STUDY
For the purpose of
resolving the research problems and questions articulated above the following
hypotheses are formulated and will be tested in the course of this study.
1. H0:
There is no positive relationship between stock market capitalization rate and
prevailing interest rate.
H1: There is a positive relationship between stock market
capitalization rate and prevailing interest rate.
2. H0:
There is no positive relationship between stock market capitalization rate and
government development stock rate.
H1: There is positive relationship between
stock market capitalization rate and development stock market rate.
3. H0:
There is no positive relationship between government development stock rate and
prevailing interest rate.
H1: There is positive relationship between government
stock market capitalization and prevailing interest rate.
1.6 SCOPE OF THE STUDY
This study employs a
time series analysis to examine the effect of interest rate on other variables
such as stock market capitalization rate and government development stock rate
obtained from 1999-2008 and from Nigeria.
Department | Banking and Finance |
Project ID Code | BFN0292 |
Chapters | 5 Chapters |
No of Pages | 38 pages |
Reference | YES |
Format | Microsoft Word |
Price | ₦5000, $15 |
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Contact Us On | +2347043069458 |