Financial Market Frictions and Stock Market Performance in Nigeria

Abstract

The study looked at how financial market frictions affected Nigerian stock market performance between 1990 and 2022. This study uses the following independent variables: market volatility and transaction cost proxy by total value of transaction (TVAT), information asymmetry proxy by volatility in real exchange rate, and regulations cost proxy by lending rate. The dependent variable is stock market performance proxy by all share index. The CBN Statistical Bulletin and the World Bank website provided the data. Auto-regressive distributed lag (ARDL), correlation analysis, and descriptive statistics were used to describe the data set with the aid of E-VIEW version 9.0. Asymmetric information and transaction costs have a major impact on stock market performance, according to the findings. Therefore, the study suggests that the capital market's transaction costs are a very good indicator of financial market friction and should be appropriately managed to promote share investment and full participation. It also suggests that the nation's taxes be effectively managed to promote capital for stock market investments.