Stock market returns, globalization and economic growth in Nigeria: Evidence from volatility and cointegrating analyses

The study investigates the effect of stock market volatility on economic growth in Nigeria, accounting for the moderating role globalization (economic, social and political globalization) from 1981 to 2018. Applying the recently developed unit root with structural breaks by Lee and Strazicich test, the Bayer-Hancks and Johansen cointegration tests, the results show that all the variables (real gross domestic product, stock market returns and globalization index) are integrated of order one, and are also cointegrated, suggesting evidence of long-run relationship. Further, the results of the GARCH(1,1) model indicate that the effect of shocks to SMR volatility are very likely to be permanent than temporary. Regarding the nexus between stock market return and economic growth, the study reveals a positive, inelastic but statistically insignificant effect of stock market returns on economic growth in Nigeria. Also, globalization has a positive, elastic and statistically significant effect on economic growth in Nigeria. The study therefore, recommends collaborations on policy measures that would stabilize and reposition the stock market to continue playing its critical role of galvanizing funds for investment and stimulating economic growth and as well strengthens globalization related policies to achieve economic growth.