Nature of Beta in the Nigerian Stock Market – Challenges and Prospects

Abdulkarim Ahmed Bukar; Cross Ogohi Daniel

doi:doi:10.11648/j.ss.20200903.14

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Nature of Beta in the Nigerian Stock Market – Challenges and Prospects

Abdulkarim Ahmed Bukar, Cross Ogohi Daniel

Published in Social Sciences (Volume 9, Issue 3)

Received: 14 May 2020 Accepted: 12 June 2020 Published: 20 June 2020

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Abstract

The paper appraise the nature of beta in the Nigeria stock market and the impact of Beta on Investors’ wealth maximization strategy in the Nigerian Stock Market. Ex-pos facto was iused to design the research as secondary data from the Nigerian stock market was deemed fit for the study. The study also indicated that there is a strong relationship between the firms’ Stock Return and Beta Coefficient. Finally, the study established that Beta Coefficient has a significant effect on the Stock Return of Firms Listed on the Nigerian Stock Exchange. Three years data collected (from January 2017 to December 2019) from the database of the Nigeria Stock Exchange was used to estimate the coefficient of the stocks’ betas. The data collectected were monthly price rates of the stocks, the All Share Index monthly rates and the Nigeria Treasury Bills monthly rates. The All Share Index is used to calculate the market returns and the Treasury Bills used as the risk free rate. To carryout the data analysis, returns were calculated for stocks and the market. Regression Analysis wss then to regress the stocks’ returns against the market returns in order to estimate the beta coefficient using the CAPM (Capital Asset Pricing Model) theory: Ri=Rrf + Bi (Rm-Rrf). The result showed that Guanranty Trust Bank, Ashaka Cement, Dangote Cement, Flour Mills Nigeria plc and Northern Nigeria Flour Mills plc have higher risk (beta) of investment than the other stocks meaning they are more volatile than the market and the other stocks that have beta value les than one (1), thence higher expected retuns. It is, therefore, recommended that Investors should invest in these mentioned Companies with higher risk as higher risk is synanimous to higher returns in order to maximise their returns.

Published in	Social Sciences (Volume 9, Issue 3)
DOI	10.11648/j.ss.20200903.14
Page(s)	82-88
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Return on Investment, Beta Coefficient, Securities, Volatilities, Dividends, Quoted Stocks, Risk

References

[1]	Abdullahi, I. B. (2011), Sectoral Analysis of Risks and Returns of the Quoted Firms in the Nigerian Capital Market. Unpublished Ph. D. Thesis Department of Accounting and Finance, University of Ilorin, Nigeria.
[2]	Adetunji et al. (2013) Forecasting Movement of ithe Nigerian Stock Exchange All Share Index using Artificial Neural and Bayesian Networks. Journal iof Finance and Investment Analysis, vol. 2, no. 1, 2013, 41-59 ISSN: 2241-0998 (print version), 2241-0996 (online) iScienpress iLtd.
[3]	Chan, A., & Chui, A. (2014). An empirical re-examination of the cross section of expected returns: UK evidence, Journal of Business Finance and Accounting, 23, 1435-1452. http://dx.doi.org/10.1111/j.1468-5957.1996.tb01211.x.
[4]	Girard, E. & Sinha, A. (2018), Risk and Return in the Next Frontier. Journal of Emerging Market Finance, 7: 43-80.
[5]	Idiyu, Isaac A., Ajekwe, Tagher and Korna Johnmark M. (2013), The Capital Market and Its Impact on Ndustrial Production in Nigeria, Journal of Business and Management, 10: 81-103.
[6]	Mohammed M. Tumola and Olaoluwa S. Yaya (2015). Estimating Bull and Beta for the Nigerian Stock Market, CBN Journal of Applied Statistics, 6: 1-22.
[7]	Oborkhale Christopher (2004). Estimating Beta in the Nigerian Stock Exchange, MBA Research Paper, Pp 1-34.
[8]	Oludoyi, S. B. (1998), Capital Market Efficiency and the Effects of Earnings Announcements on Share Prices in iNigeria. Unpublished Ph. D., Thesis, Department of Economics, University of Ibadan, Nigeria.
[9]	Oke, B. O. (2013). Capital Asset Pricing Model (CAPM): Evidence from Nigeria. Research Journal of Finance and Accounting, 4 (9), 17-26.
[10]	Porter and Ezze (1996) Time-Varying Behavior of Stock Prices, Volatility Dynamics and Beta Risk in Industry Sector Indices of the Shanghai Stock Exchange. www.sciedu.ca/afr Accounting and Finance Research Vol. 1, No. 2; 2012.
[11]	Prince C. Nwachukwu (2014). Effects of Episodic Market Conditions on Beta Variability in the Nigerian Stock Market, Journal of International Business and Economic Research, 13: 1-14.
[12]	Richard B. (2014). Beyond beta: why investment risk metrics falls hort. Moneyrate.com.
[13]	Sharpe, W. F (1964), Capital Asset Pricing Model; A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance.
[14]	Vetiva Fund Managers Limited (2014). Introduction to Beta Strategies, Portfolio Construction, Pp1-82.
[15]	Wilson E. Herbert, Chuka Nwude and Francis Onyilo (2017). The Application of Capital Asset Pricing Model in the Nigerian Chemicals and Paints Industrial Sector, European Journal of Accounting, Auditing and Finance Research, 5: 12-32.

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APA Style

Abdulkarim Ahmed Bukar, Cross Ogohi Daniel. (2020). Nature of Beta in the Nigerian Stock Market – Challenges and Prospects. Social Sciences, 9(3), 82-88. https://doi.org/10.11648/j.ss.20200903.14

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Abdulkarim Ahmed Bukar; Cross Ogohi Daniel. Nature of Beta in the Nigerian Stock Market – Challenges and Prospects. Soc. Sci. 2020, 9(3), 82-88. doi: 10.11648/j.ss.20200903.14

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AMA Style

Abdulkarim Ahmed Bukar, Cross Ogohi Daniel. Nature of Beta in the Nigerian Stock Market – Challenges and Prospects. Soc Sci. 2020;9(3):82-88. doi: 10.11648/j.ss.20200903.14

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@article{10.11648/j.ss.20200903.14,
  author = {Abdulkarim Ahmed Bukar and Cross Ogohi Daniel},
  title = {Nature of Beta in the Nigerian Stock Market – Challenges and Prospects},
  journal = {Social Sciences},
  volume = {9},
  number = {3},
  pages = {82-88},
  doi = {10.11648/j.ss.20200903.14},
  url = {https://doi.org/10.11648/j.ss.20200903.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ss.20200903.14},
  abstract = {The paper appraise the nature of beta in the Nigeria stock market and the impact of Beta on Investors’ wealth maximization strategy in the Nigerian Stock Market. Ex-pos facto was iused to design the research as secondary data from the Nigerian stock market was deemed fit for the study. The study also indicated that there is a strong relationship between the firms’ Stock Return and Beta Coefficient. Finally, the study established that Beta Coefficient has a significant effect on the Stock Return of Firms Listed on the Nigerian Stock Exchange. Three years data collected (from January 2017 to December 2019) from the database of the Nigeria Stock Exchange was used to estimate the coefficient of the stocks’ betas. The data collectected were monthly price rates of the stocks, the All Share Index monthly rates and the Nigeria Treasury Bills monthly rates. The All Share Index is used to calculate the market returns and the Treasury Bills used as the risk free rate. To carryout the data analysis, returns were calculated for stocks and the market. Regression Analysis wss then to regress the stocks’ returns against the market returns in order to estimate the beta coefficient using the CAPM (Capital Asset Pricing Model) theory: Ri=Rrf + Bi (Rm-Rrf). The result showed that Guanranty Trust Bank, Ashaka Cement, Dangote Cement, Flour Mills Nigeria plc and Northern Nigeria Flour Mills plc have higher risk (beta) of investment than the other stocks meaning they are more volatile than the market and the other stocks that have beta value les than one (1), thence higher expected retuns. It is, therefore, recommended that Investors should invest in these mentioned Companies with higher risk as higher risk is synanimous to higher returns in order to maximise their returns.},
 year = {2020}
}

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TY  - JOUR
T1  - Nature of Beta in the Nigerian Stock Market – Challenges and Prospects
AU  - Abdulkarim Ahmed Bukar
AU  - Cross Ogohi Daniel
Y1  - 2020/06/20
PY  - 2020
N1  - https://doi.org/10.11648/j.ss.20200903.14
DO  - 10.11648/j.ss.20200903.14
T2  - Social Sciences
JF  - Social Sciences
JO  - Social Sciences
SP  - 82
EP  - 88
PB  - Science Publishing Group
SN  - 2326-988X
UR  - https://doi.org/10.11648/j.ss.20200903.14
AB  - The paper appraise the nature of beta in the Nigeria stock market and the impact of Beta on Investors’ wealth maximization strategy in the Nigerian Stock Market. Ex-pos facto was iused to design the research as secondary data from the Nigerian stock market was deemed fit for the study. The study also indicated that there is a strong relationship between the firms’ Stock Return and Beta Coefficient. Finally, the study established that Beta Coefficient has a significant effect on the Stock Return of Firms Listed on the Nigerian Stock Exchange. Three years data collected (from January 2017 to December 2019) from the database of the Nigeria Stock Exchange was used to estimate the coefficient of the stocks’ betas. The data collectected were monthly price rates of the stocks, the All Share Index monthly rates and the Nigeria Treasury Bills monthly rates. The All Share Index is used to calculate the market returns and the Treasury Bills used as the risk free rate. To carryout the data analysis, returns were calculated for stocks and the market. Regression Analysis wss then to regress the stocks’ returns against the market returns in order to estimate the beta coefficient using the CAPM (Capital Asset Pricing Model) theory: Ri=Rrf + Bi (Rm-Rrf). The result showed that Guanranty Trust Bank, Ashaka Cement, Dangote Cement, Flour Mills Nigeria plc and Northern Nigeria Flour Mills plc have higher risk (beta) of investment than the other stocks meaning they are more volatile than the market and the other stocks that have beta value les than one (1), thence higher expected retuns. It is, therefore, recommended that Investors should invest in these mentioned Companies with higher risk as higher risk is synanimous to higher returns in order to maximise their returns.
VL  - 9
IS  - 3
ER  -

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Author Information

Abdulkarim Ahmed Bukar

Department of Business Administration, Nile University of Nigeria, Abuja, Nigeria
Cross Ogohi Daniel

Department of Business Administration, Nile University of Nigeria, Abuja, Nigeria

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APA Style

Abdulkarim Ahmed Bukar, Cross Ogohi Daniel. (2020). Nature of Beta in the Nigerian Stock Market – Challenges and Prospects. Social Sciences, 9(3), 82-88. https://doi.org/10.11648/j.ss.20200903.14

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ACS Style

Abdulkarim Ahmed Bukar; Cross Ogohi Daniel. Nature of Beta in the Nigerian Stock Market – Challenges and Prospects. Soc. Sci. 2020, 9(3), 82-88. doi: 10.11648/j.ss.20200903.14

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AMA Style

Abdulkarim Ahmed Bukar, Cross Ogohi Daniel. Nature of Beta in the Nigerian Stock Market – Challenges and Prospects. Soc Sci. 2020;9(3):82-88. doi: 10.11648/j.ss.20200903.14

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@article{10.11648/j.ss.20200903.14,
  author = {Abdulkarim Ahmed Bukar and Cross Ogohi Daniel},
  title = {Nature of Beta in the Nigerian Stock Market – Challenges and Prospects},
  journal = {Social Sciences},
  volume = {9},
  number = {3},
  pages = {82-88},
  doi = {10.11648/j.ss.20200903.14},
  url = {https://doi.org/10.11648/j.ss.20200903.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ss.20200903.14},
  abstract = {The paper appraise the nature of beta in the Nigeria stock market and the impact of Beta on Investors’ wealth maximization strategy in the Nigerian Stock Market. Ex-pos facto was iused to design the research as secondary data from the Nigerian stock market was deemed fit for the study. The study also indicated that there is a strong relationship between the firms’ Stock Return and Beta Coefficient. Finally, the study established that Beta Coefficient has a significant effect on the Stock Return of Firms Listed on the Nigerian Stock Exchange. Three years data collected (from January 2017 to December 2019) from the database of the Nigeria Stock Exchange was used to estimate the coefficient of the stocks’ betas. The data collectected were monthly price rates of the stocks, the All Share Index monthly rates and the Nigeria Treasury Bills monthly rates. The All Share Index is used to calculate the market returns and the Treasury Bills used as the risk free rate. To carryout the data analysis, returns were calculated for stocks and the market. Regression Analysis wss then to regress the stocks’ returns against the market returns in order to estimate the beta coefficient using the CAPM (Capital Asset Pricing Model) theory: Ri=Rrf + Bi (Rm-Rrf). The result showed that Guanranty Trust Bank, Ashaka Cement, Dangote Cement, Flour Mills Nigeria plc and Northern Nigeria Flour Mills plc have higher risk (beta) of investment than the other stocks meaning they are more volatile than the market and the other stocks that have beta value les than one (1), thence higher expected retuns. It is, therefore, recommended that Investors should invest in these mentioned Companies with higher risk as higher risk is synanimous to higher returns in order to maximise their returns.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Nature of Beta in the Nigerian Stock Market – Challenges and Prospects
AU  - Abdulkarim Ahmed Bukar
AU  - Cross Ogohi Daniel
Y1  - 2020/06/20
PY  - 2020
N1  - https://doi.org/10.11648/j.ss.20200903.14
DO  - 10.11648/j.ss.20200903.14
T2  - Social Sciences
JF  - Social Sciences
JO  - Social Sciences
SP  - 82
EP  - 88
PB  - Science Publishing Group
SN  - 2326-988X
UR  - https://doi.org/10.11648/j.ss.20200903.14
AB  - The paper appraise the nature of beta in the Nigeria stock market and the impact of Beta on Investors’ wealth maximization strategy in the Nigerian Stock Market. Ex-pos facto was iused to design the research as secondary data from the Nigerian stock market was deemed fit for the study. The study also indicated that there is a strong relationship between the firms’ Stock Return and Beta Coefficient. Finally, the study established that Beta Coefficient has a significant effect on the Stock Return of Firms Listed on the Nigerian Stock Exchange. Three years data collected (from January 2017 to December 2019) from the database of the Nigeria Stock Exchange was used to estimate the coefficient of the stocks’ betas. The data collectected were monthly price rates of the stocks, the All Share Index monthly rates and the Nigeria Treasury Bills monthly rates. The All Share Index is used to calculate the market returns and the Treasury Bills used as the risk free rate. To carryout the data analysis, returns were calculated for stocks and the market. Regression Analysis wss then to regress the stocks’ returns against the market returns in order to estimate the beta coefficient using the CAPM (Capital Asset Pricing Model) theory: Ri=Rrf + Bi (Rm-Rrf). The result showed that Guanranty Trust Bank, Ashaka Cement, Dangote Cement, Flour Mills Nigeria plc and Northern Nigeria Flour Mills plc have higher risk (beta) of investment than the other stocks meaning they are more volatile than the market and the other stocks that have beta value les than one (1), thence higher expected retuns. It is, therefore, recommended that Investors should invest in these mentioned Companies with higher risk as higher risk is synanimous to higher returns in order to maximise their returns.
VL  - 9
IS  - 3
ER  -

Copy | Download