Uncontrollable Risk Factors and Investment Performance in the Nigerian Capital Market: An Impact Study
Vol. 4 Issue 2
This paper analyses the impact of uncontrollable risk factors on investment performance in the Nigerian Capital market applying the Arbitrage Pricing Theory. The specific objective was to examine the effect of inflation rate risk, interest rate risk, exchange rate volatility risk, money supply rate of change, real gross domestic product and treasury bill rate on investment performance in the Nigerian Capital market. We extracted thirty-year (1988-2017) panel data from Central Bank of Nigeria Statistical Bulletin and published annual reports of five quoted companies in the Nigerian Stock Exchange for investment performance proxy by price earnings ratio. Five models were specified to express the relationship between the independent variables and the dependent variable for five quoted companies in the Nigerian Stock Exchange. The models were estimated using the Ordinary Least Square Regression analysis and the global utility of the models were also evaluated. On the basis of our analysis, we found that investment performance for the Nigerian Capital market does not toe the line of the objectives of the Arbitrage Pricing Theory as the selected uncontrollable risk factors do not have significant impact on investment performance for the period under review. We therefore recommended Policy motivations aimed at managing market realities in the capital market, government to pursue prudent and transparent macroeconomic policies for the single intent to develop the capital market. Regulators and government should embark on well calculated steps geared towards curtailing the negative influences from uncontrollable risk factors affecting investment performance in the Nigerian capital market.
