Faculty: Management Sciences
Department: Banking And Finance


Aime, T. Emmanuel
Okonkwo I. Victor
Ezeabasili N. Vincent


This work studied the effects of investors’ sentiment on stock market returns in Nigeria using a 27year time series data for 1990-2016. Stock prices both in developed and developing countries are expected to be responsive to economic and market fundamentals as well as new information. The deviation of stock prices from their fundamentals’ value is therefore generating questions and drawing attention to find out if non-market and non-economic fundamentals are responsive for such deviation. The specific objective is to examine the effect of investors’ sentiment on stock market returns in Nigeria. The secondary data for the study were sourced from Central Bank of Nigeria’s statistical bulletin, Nigerian Stock Exchange Facts book, and Securities and Exchange Commission publications. The Multiple Regression analysis was used to assess the nature and the degree of the relationship between the variables. The study was anchored on the noise trader risk in financial markets’ model. The Engle-Granger and the Johansen co integration techniques were used to estimate the structural models. The econometric evidence revealed the stationarity of the variables at levels and at first difference while Johansen co-integration approach also confirms the existence of co-integrating relationship at the 0.05% and 0.01% level of significance. The result of the analysis shows that Consumer confidence index; Initial public offer and stock market indices have no significant effect on stock market returns. The Dividend per share, Stock price volatility and Turnover ratio have significant effect on stock market return. The exchange rate was the only macroeconomic fundamental that significantly affected stock market return in Nigeria. Thus macroeconomic fundamentals were not critical determinants of stock market return performance in Nigeria. The investors’ sentiment played dominant role in stock market return. The study recommended that the Nigerian capital market should create an enabling environment that is highly regulated to cause a free flow of information to enable investors to be rational which can mitigate their sentiment backdrop