Paper Title
The Effect Of Exchange Rate Volatility On Share Price Fluctuations In Nigeria
Abstract
This study examined the impact of exchange rate volatility on share price fluctuations in Nigeria. applying a
GARCH (1,1) model and the granger causality test on monthly dataset spanning 1985:1 to 2012:4 the results showed that
whereas exchange rate expectation has positive impact on stock returns the impact of exchange rate volatility was
statistically not significant. Further results showed that information flow has significant impact on exchange rate uncertain.
This model is robust to serial correlation and further ARCH effect as indicated by the ARCH LM test for serial correlation
and the LM test for ARCH effect. However, exchange rate volatility impacts negatively on share price fluctuations. Also,
there exists a unidirectional causality running from share prices to exchange rate. The study therefore conclude that although
exchange rate expectations help to predict returns on share prices exchange rate volatility had a negative impact on share
price fluctuations in Nigeria.
Keywords – Exchange rate, Fluctuations, Returns on Share prices, Volatility