| 520 สาระสังเขป |
This paper examines the relationship between inflation and the capital market by assessing the impact of inflation on aggregate stock prices in the Nigerian capital market. Secondary data used for the analysis were obtained from Central Bank of Nigeria Statistical Bulletin and official websites of US stock exchanges for the period 2006 to 2020. The data included All-Share Index, inflation rate, Treasury bill rate, broad money supply, exchange rate and two US stock market indices, namely the S&P 500 Index and Dow Jones Industrial Average Index for the period 2006 to 2020. The Auto-regressive Distributed Lag (ARDL) model was employed in the analysis. Results showed that inflation rate is negatively though insignificantly related to aggregate stock prices both in the short-run and long-run. The risk-free rate (Treasury Bill rate) has positive though insignificant effect on stock prices. Money supply has negative impact on aggregate stock prices, both in the short-run and long-run. However, the impact was found to be significant in the short-run and insignificant in the long-run. Exchange rate is also positively but not significantly related to aggregate stock prices. The two US stock market indices had insignificant relationship with the All-Share Index. While S&P 500 Index shows positive relationship, the Dow Jones Industrial Average (DJIA) Index showed negative relationship with the Nigerian market index. The negative though weak impact of inflation on stock prices in Nigeria is contrary to the Fisher hypothesis that posits that prices will adjust to reflect the changes in the inflation rate. In line with the findings of the study, it is recommended that policy makers put measures in place to curb inflationary trends by designing monetary policies to reduce money supply in the economy. |