Factors Affecting Share Prices
International Research Journal of Finance and Economics ISSN 1450-2887 Issue 30 (2009) © EuroJournals Publishing, Inc. 2009 http://www.eurojournals.com/finance.htm
Determinants of Equity Prices in the Stock Markets
Somoye, Russell Olukayode Christopher Dept. of Banking & Finance, Faculty of Management Science Olabisi Onabanjo University, Ago Iwoye, Nigeria P.O. Box 1104 Ijebu-Ode, Ijebu-Ode, Ogun State, Nigeria E-mail: kayodesomoye@yahoo.com Akintoye, Ishola Rufus Dept. of Accounting, Faculty of Management Science Olabisi Onabanjo University, Ago Iwoye, Nigeria E-mail: irakintoye@yahoo.com Oseni, Jimoh Ezekiel Dept. of Banking and Finance, Faculty of Management Science Olabisi Onabanjo University, Ago Iwoye, Nigeria E-mail: zikoseni@yahoo.com Abstract Brav & Heaton (2003) alleges market indeterminacy (a situation where it is impossible to determine whether an asset is efficiently or inefficiently priced) in the stock market. Kang (2008) argue that empirical tests of linear asset pricing models show presence of mispricing in asset pricing. Asset pricing is considered efficient if the asset price reflects all available market information to the extent no informed trader can outperform the market and / or the uninformed trader. This study examined the extent to which some "information factors" or market indices affect the stock price. A model defined by Al-Tamimi (2007) was used to regress the variables (stock prices, earnings per share, gross domestic product, lending interest rate and foreign exchange rate) after testing for multicollinarity among the independent variables. The multicollinarity test revealed very strong correlation between gross domestic product and crude oil price, gross domestic product and foreign exchange rate, lending interest rate and inflation rate. All the variables have positive correlation to stock prices with the exception of lending interest rate and foreign exchange rate. The outcomes of the study agree with earlier studies by
Determinants of Equity Prices in the Stock Markets
Somoye, Russell Olukayode Christopher Dept. of Banking & Finance, Faculty of Management Science Olabisi Onabanjo University, Ago Iwoye, Nigeria P.O. Box 1104 Ijebu-Ode, Ijebu-Ode, Ogun State, Nigeria E-mail: kayodesomoye@yahoo.com Akintoye, Ishola Rufus Dept. of Accounting, Faculty of Management Science Olabisi Onabanjo University, Ago Iwoye, Nigeria E-mail: irakintoye@yahoo.com Oseni, Jimoh Ezekiel Dept. of Banking and Finance, Faculty of Management Science Olabisi Onabanjo University, Ago Iwoye, Nigeria E-mail: zikoseni@yahoo.com Abstract Brav & Heaton (2003) alleges market indeterminacy (a situation where it is impossible to determine whether an asset is efficiently or inefficiently priced) in the stock market. Kang (2008) argue that empirical tests of linear asset pricing models show presence of mispricing in asset pricing. Asset pricing is considered efficient if the asset price reflects all available market information to the extent no informed trader can outperform the market and / or the uninformed trader. This study examined the extent to which some "information factors" or market indices affect the stock price. A model defined by Al-Tamimi (2007) was used to regress the variables (stock prices, earnings per share, gross domestic product, lending interest rate and foreign exchange rate) after testing for multicollinarity among the independent variables. The multicollinarity test revealed very strong correlation between gross domestic product and crude oil price, gross domestic product and foreign exchange rate, lending interest rate and inflation rate. All the variables have positive correlation to stock prices with the exception of lending interest rate and foreign exchange rate. The outcomes of the study agree with earlier studies by
Bibliography: 188 Rock, Kevin, (1986), “Why New Issues Are Underpriced”, Journal of Financial Economics, 15 Ross, Stephen A Appendix Appendix I: Selected Market Indices (2001 - 2007) International Research Journal of Finance and Economics - Issue 30 (2009) Appendix II: Regression Analysis Of Selected Market Indices (2001 – 2007)