Foreign portfolio investment and stock market performance in Nigeria

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Faculty of Social and Management Sciences, Olabisi Onabanjo University, Ago-Iwoye


The paper examines the impact of foreign portfolio investment (FPI) on stock market performance in Nigeria using monthly data from year 2006 to 2015. Results from ARDL bound testing approach reveals that FPI have adverse effect on market performance. However, the role of FPI altered during the global financial crisis of 2008 and 2009 as it increased stock price index and reduced market volatility during this period. This suggests that foreign inflows were valued more during the crisis period. Findings also reveal that macroeconomic factors, which include exchange rate, money supply and interest rate, explain stock market index while exchange rate affects stock return volatility. The study offers useful policy implications for government in its liberalization policies and recommends that government should be more cautious in its liberalization policy. The interest of domestic investors should not be undermined while putting measures in place to encourage FPI of longer-term nature.



Foreign portfolio investment, Stock market, Stock price index, Stock return volatility