Estimating the Threshold Level of Stock Market Price Volatility on Economic Growth
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The threshold level of stock market volatility on economic growth was estimated using quadratic
regression model based on annual data of the Nigerian economy from 1985 to 2016. The study found
evidence of a threshold effect of stock market volatility on economic growth in Nigeria. The established
that the critical point of stock market price volatility which impacts on economic growth for the
Nigerian economy is 7.1 percent, beyond this level, stock market price volatility starts exerting cost on
growth. The marginal impact of stock market price volatility on growth becomes negative beyond a
threshold ratio of about 7.1 percent of GDP. Also, the study revealed that almost all the explanatory
variables had signs that were inconsistent with theoretical predictions except capital and trade that had
expected signs in line with theoretical expectations. All stakeholders of the Nigerian stock market are,
therefore, advised to monitor the stock market price closely such that investment is made close to or
equal to 7.1 percent of the GDP to have a positive impact on the economy. Any investment made
beyond this threshold point could have an adverse effect on economic growth
Keywords
HG Finance