CHAPTER ONE

1.1 INTRODUCTION

1.1.1 Defintion A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors that, as in all free markets, affect the price of stocks (see stock valuation). There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities. 1.1.2 History Securities markets took centuries to develop. The idea of debt dates back to the ancient world, as evidenced for example by ancient Mesopotamian clay tablets recording interest-bearing loans. There is little consensus among scholars as to when corporate stock was first traded. Some see the key event as the Dutch East India Company's founding in 1602, while others point to earlier developments. Economist Ulrike Malmendier of the University of California at Berkeley argues that a share market existed as far back as ancient Rome. In the Roman Republic, which existed for centuries before the Empire was founded, there were societates publicanorum, organizations of contractors or leaseholders who performed temple-building and other services for the government. One such service was the feeding of geese on the Capitoline Hill as
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a reward to the birds after their honking warned of a Gallic invasion in 390 B.C. Participants in such organizations had partes or shares, a concept mentioned various times by the statesman and orator Cicero. In one speech, Cicero mentions "shares that had a very high price at the time." Such evidence, in Malmendier's view, suggests the instruments were tradable, with fluctuating values based on an organization's success. The societas declined into obscurity in the time of the emperors, as most of their services were taken over by direct agents of the state. Tradable bonds as a commonly used type of security were a more recent innovation, spearheaded by the Italian city-states of the late medieval and early Renaissance periods. In 1171, the authorities of the Republic of Venice, concerned about their wardepleted treasury, drew a forced loan from the citizenry. Such debt, known as prestiti, paid 5 percent interest per year and had an indefinite maturity date. Initially regarded with suspicion, it came to be seen as a valuable investment that could be bought and sold. The bond market had begun. From 1262 to 1379, Venice never missed an interest payment, solidifying the credibility of the new instruments. Other Italian city-states such as Florence and Genoa became bond issuers as well, often as a means of paying for warfare. Bonds were traded widely in Italy and beyond, a business facilitated by bankers such as the Medicis. War between Venice and Genoa resulted in suspension of prestiti interest payments in the early 1380s, and when the market was restored, it was at a lower interest rate. Venice's bonds traded at steep discounts for decades thereafter. Other blows to financial stability resulted from the Hundred Years War, which caused monarchs of France and England to default on debts to Italian banks, and the Black Death, which ravaged much of Europe. Still, the idea of debt as a tradable investment endured. As with bonds, the concept of stock developed gradually. Some scholars place its origins as far back as ancient Rome. Partnership agreements dividing ownership into shares date back at least to the 13th century, again with Italian city-states in the vanguard. Such arrangements, however, typically extended only to a handful of people and were of limited duration, as with shipping partnerships that applied only to a single sea voyage. The forefront of commercial innovation eventually shifted from Italy to northern Europe. The Hanseatic League, an alliance of mercantile towns such as Bruges and Antwerp, operated counting houses to expedite trade. The term "bourse," which has become synonymous with "stock market," arose in Bruges, either from a sign outside a trading center showing one or a few purses (bursa is
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Latin for bag) or because merchants gathered at the house of a man named Van der Burse; nobody's quite sure. By the late 1500s, British merchants were experimenting with joint-stock companies intended to operate on an ongoing basis; one such was the Muscovy Company, which sought to wrest trade with Russia away from Hanseatic dominance. The next big step was in Amsterdam. In 1602, the Dutch East India Company was formed as a joint-stock company with shares that were readily tradable. The stock market had begun. The Dutch East India Company, formed to build up the spice trade, operated as a colonial ruler in what's now Indonesia and beyond, a purview that included conducting military operations against recalcitrant natives and competing colonial powers. Control of the company was held tightly by its directors, with ordinary shareholders not having much influence on management or even access to the company's accounting statements. However, shareholders were rewarded well for their investment. The company paid an average dividend of over 16 percent per year from 1602 to 1650. Financial innovation in Amsterdam took many forms. In 1609, investors led by one Isaac Le Maire formed history's first bear syndicate, but their coordinated trading had only a modest impact in driving down share prices, which tended to be robust throughout the 17th century. By the 1620s, the company was expanding its securities issuance with the first use of corporate bonds. The Dutch West India Company was formed in 1621, bringing a new issuer to the burgeoning securities market. Amsterdam's growth as a financial center survived the tulip mania of the 1630s, in which contracts for the delivery of flower bulbs soared wildly and then crashed. New techniques and instruments proliferated for securities as well as commodities, including options, repos and margin trading. Joseph de la Vega, also known as Joseph Penso de la Vega and by other variations of his name, was an Amsterdam trader from a Spanish Jewish family and a prolific writer as well as a successful businessman in 17th-century Amsterdam. His 1688 book Confusion of Confusions explained the workings of the city's stock market. It was the earliest book about stock trading, taking the form of a dialogue between a merchant, a shareholder and a philosopher, the book described a market that was sophisticated but also prone to excesses, and de la Vega offered advice to his readers on such topics as the unpredictability of market shifts and the importance of patience in investment. The year that de la Vega published also brought an event that helped spread financial techniques and talent from Amsterdam to London. This was the "glorious revolution," in which Dutch ruler William of Orange also ascended to England's throne. William sought to modernize England's finances to pay for its
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wars, and thus the kingdom's first government bonds were issued in 1693 and the Bank of England was set up the following year. Soon thereafter, English joint-stock companies began going public. London's first stockbrokers, however, were barred from the old commercial center known as the Royal Exchange, reportedly because of their rude manners. Instead, the new trade was conducted from coffee houses along Exchange Alley. By 1698, a broker named John Castaing, operating out of Jonathan's Coffee House, was posting regular lists of stock and commodity prices. Those lists mark the beginning of the London Stock Exchange. One of history's greatest financial bubbles occurred in the next few decades. At the center of it were the South Sea Company, set up in 1711 to conduct English trade with South America, and the Mississippi Company, focused on commerce with France's Louisiana colony and touted by transplanted Scottish financier John Law, who was acting in effect as France's central banker. Investors snapped up shares in both, and whatever else was available. In 1720, at the height of the mania, there was even an offering of "a company for carrying out an undertaking of great advantage, but nobody to know what it is." By the end of that same year, share prices were collapsing, as it became clear that expectations of imminent wealth from the Americas were overblown. In London, Parliament passed the Bubble Act, which stated that only royally chartered companies could issue public shares. In Paris, Law was stripped of office and fled the country. Stock trading was more limited and subdued in subsequent decades. Yet the market survived, and by the 1790s shares were being traded in the young United States. On February 8, 1971, NASDAQ, the world's first electronic stock exchange, started its operations 1.1.3 The role of stock exchanges Stock exchanges have multiple roles in the economy. This may include the following: 1.1.3.1 Raising capital for businesses

The Stock Exchange provide companies with the facility to raise capital for expansion through selling shares to the investing public. 1.1.3.2 Mobilizing savings for investment

When people draw their savings and invest in shares (through a IPO or the issuance of new company shares of an already listed company), it usually leads
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to rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to help companies' management boards finance their organizations. This may promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels of firms. Sometimes it is very difficult for the stock investor to determine whether or not the allocation of those funds is in good faith and will be able to generate long-term company growth, without examination of a company's internal auditing. 1.1.3.3 Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion. 1.1.3.4 Profit sharing

Both casual and professional stock investors, as large as institutional investors or as small as an ordinary middle class family, through dividends and stock price increases that may result in capital gains, share in the wealth of profitable businesses. Unprofitable and troubled businesses may result in capital losses for shareholders. 1.1.3.5 Corporate governance

By having a wide and varied scope of owners, companies generally tend to improve management standards and efficiency to satisfy the demands of these shareholders, and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, when poor financial, ethical or managerial records are known by the stock investors, the stock and the company tend to lose value. In the stock exchanges, shareholders of underperforming firms are often penalized by significant share price decline, and they tend as well to dismiss incompetent management teams.

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1.1.3.6

Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. 1.1.3.7 Government capital-raising for development projects

Governments at various levels may decide to borrow money to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need, in the short term, to directly tax citizens to finance development-though by securing such bonds with the full faith and credit of the government instead of with collateral, the government must eventually tax citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature. 1.1.3.8 Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy. 1.2 SIGNIFICANCE OF THE STUDY

The study was carried-out in the Nigerian Stock Exchange (NSE). The Researcher uses statistical methods to compare the effect (if any) of stock exchange variables on the Nigerian Stock Exchange. In that wise, the study should be appreciated by registered companies in Nigeria who operate in the Country as it affords them the opportunity to make inference on the state of the Nigerian market. Also, it is significant to the Ministry of Finance as it gives them an insight on trade level of the Country. Finally, Economist and individuals will find the study handy as it gives a good bases to forecast the possible state of the nations economy in the nearest future.

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1.3 1. 2. 3. 1.4

AIMS AND OBJECTIVES To fit a multiple regression model to the data. Test the significance of the stock exchange variables Correlation of the variables. SCOPE AND LIMITATION

1.4.1 Scope The Nigerian Stock Exchange was established in 1960 as the Lagos Stock Exchange. In December 1977 it became The Nigerian Stock Exchange, with branches established in some of the major commercial cities of the country. At present, there are six branches of The Nigerian Stock Exchange. Each branch has a trading floor. The branch in Lagos was opened in 1961; Kaduna, 1978; Port Harcourt, 1980; Kano, 1989; Onitsha, February 1990; and Ibadan August 1990; Abuja, October 1999 and Yola, April 2002. Lagos is the Head Office of The Exchange. An office has just been opened in Abuja. The Exchange started operations in 1961 with 19 securities listed for trading. Today there are 262 securities listed on The Exchange, made up of 11 Government Stocks, 49 Industrial Loan (Debenture/Preference) Stocks and 194 Equity/Ordinary Shares of Companies, all with a total market capitalization of approximately N287.0 billion, as at August 31, 1999. Most of the listed companies have foreign/multinational affiliations and represent a cross-section the economy, ranging from agriculture through manufacturing to services. The market has in place a tested network of Stockbrokerage Firms, Issuing Houses (Merchant Banks), practicing corporate law firms and over 50 quality firms of auditors and reporting accountants (most with international links). The Stock Exchange and most of the nations stock broking firms and issuing houses are staffed with creative financial engineers that can compete anywhere in the World. Therefore, the market has in place a network of intermediating organizations that can effectively and creditably meet the challenges and growing needs of investors in Nigerian. Integrity: is the watchword of The Stock Exchange. Market operators subscribe to the code Our word is our bond. Thus, public trust in the Nigerian stock market has grown tremendously, with about three million individual investors and hundreds of institutional investors (including foreigners who own about 47% of the quoted companies) using the facilities of The Exchange. The Stock Exchanges 39-year history is devoid of any fraud, shocks, scandals or insider dealings.
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Trading: The call over trading system was in April replaced with the Automated Trading System (ATS), with bids and offers now matched by stockbrokers on the Trading Floors of The Stock Exchange through a network of computers. This is done every business day from 11.00 a.m. till all bids and offers have been executed (about 1.30 p.m. on the average). Pricing: Prices of new issues are determined by issuing houses/stockbrokers, while on the secondary market prices are made by stockbrokers only. The market/quote prices, along with the All-Share Index, are published daily in The Stock Exchange Daily Official List, The Nigerian Stock Exchange CAPNET (an intranet facility), The Nigerian Stock Exchange website (www.nigerianstockexchange.com), Newspapers and on the stock market page of the Reuters Electronic Contributor System. Our on-line code in the Reuters Network is NSXA-B. Pricing and other direct controls gave way to indirect controls by the regulatory bodies (Securities and Exchange Commission and The Stock Exchange) following the deregulation of the market in 1993. Deregulation has improved the competitiveness of the market, in addition to making it more investor-friendly. The All-Share Index: The Exchange maintains an All-Share Index formulated in January 1984 (January 3, 1984 = 100). Only common stocks (ordinary shares) are included in the computation of the index. The index is valuerelative and is computed daily. Clearing, Delivery and Settlement: Clearing, Settlement and Delivery of transactions on The Exchange are done electronically by the Central Securities Clearing System Limited (CSCS), a subsidiary of The Stock Exchange. The CSCS Limited (the Clearing House) was incorporated in 1992 as part of the effort to make the Nigerian stock market more efficient and investor-friendly. Apart from clearing, settlement and delivery, the CSCS Limited offers custodian services. (See the write-up on the Central Securities Clearing System Limited for more about clearing, delivery and settlement on The Exchange.) Stock Market Legislations: Transactions in the stock market are guided by the following legislations, among others: Investments & Securities Decree No. 45, 1999. Companies and Allied Matters Decree 1990. Nigerian Investment Promotion Commission Decree, 1995. Foreign Exchange (Miscellaneous Provisions) Decree, 1995. Regulation: Transactions on The Exchange are regulated by The Nigerian Stock Exchange, as a self-regulatory organization (SRO), and the Securities &
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Exchange Commission (SEC), which administers the Investments & Securities Decree 1999. Internationalization of the Stock Market: Following the deregulation of the capital market in 1993, the Federal Government in 1995 internationalized the capital market, with the abrogation of laws that constrained foreign participation in the Nigerian capital market. Consequent upon the abrogation of the Exchange Control Act 1962 and the Nigerian Enterprise Promotion Decree 1989, foreigners can now participate in the Nigerian capital market both as operators and investors. Also, there are no limits any more to the percentage of foreign holding in any company registered in the country. Ahead of this development, The Exchange had since June 2, 1987, linked up with the Reuters Electronic Contributor System for online global dissemination of stock market information - trading statistics, All-Share Index, company investment ratios, and company news (financial statements and corporate actions). In November, 1996 The Exchange launched its Internet System (CAPNET) as one of the infrastructural support for meeting the challenges of internationalization and achieving an enhanced service delivery. The Internet System facilitates communication among local and international participants in the market, as subscribers to the system include stockbrokers, quoted companies, issuing houses, etc, who now use the facility to receive and send e-mail, globally and locally. But more importantly,they can, through this medium, access key market information - trading statistics (current and historical), corporate trading results, etc. 1.4.2 Limitation Research is an area where Nigeria as a Country is lagging behind. Most times the reason is not totally that Nigerian students are lazy rather the fact that efforts made to getting relevant information in most cases proves abortive. This is one of the challenges and limitations I had in carrying out the research. As a statistician, without a well-presented data, the overall result will be highly misleading how much more when there is no data. Also, sourcing for necessary information was really tasking. Too many factors militated against the quick completion of this research but to mention a few.

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1.5

LITERATURE REVIEW

Stock market is globally practiced hence a national entity. So many individuals have talked about the theme of the research. Some of whom includes: Statman (1984) in his article on Efficient Stock Market, he concluded that People are rational in standard finance; they are normal in behavioral finance. Rational people care about utilitarian characteristics, but not valueexpressive ones, are never confused by cognitive errors, have perfect selfcontrol, are always averse to risk, and are never averse to regret. Normal people do not obediently follow that pattern. Standard finance asks for too much when it asks for market efficiency in the rational sense, and investment professionals ask for too much when they insist that the primary contribution of behavioral finance is its potential help in beating the market. Accepting market efficiency in the sense of beating the markets and rejecting it in the sense of rationality would allow finance researchers to ask questions about the roles of investment professionals that go beyond the role of beating the market. Investment professionals belong to many groups, and we need to understand the benefits, both utilitarian and value expressive, they provide. Amihud (1986) in his paper on evidence from the Tel-Aviv stock exchange he examined the value effects of improvements in the trading mechanism. According to him, selected stocks on the Tel Aviv Stock Exchange were transferred gradually from a daily call auction to a mechanism where the call auction was followed by iterated continuous trading sessions. This event was associated with a positive and permanent price appreciation. The cumulative average market-adjusted return over a period that started five days prior to the announcement and ended 30 days after the stocks started trading by the new method was approximately 5.5%. In addition, we find positive liquidity externalities (spillovers) across related stocks, and improvements in the value discovery process due to the improved trading method. He concluded that there was a positive association/correlation between liquidity gains and price appreciation. Calderelli (1987) in his article on a prototype model of stock market he discussed it from numerical point of view. In a self-organized system, he considered only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate their assets by speculating on the price's fluctuations which are produced by them. The model he developed reproduced rather realistic price histories whose statistical properties are also similar to those observed in real markets.
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Collins (1988) in his write-up on automated stock exchange trading was of the opinion that an improvement in computer automated stock exchange trading whereby a graphic user interface with a mouse and display is used to select parameters such as share symbol, price selection, order size, and transaction type, as well as other indicators to launch a trading order to the order entry system of a stock exchange computer. He suggest that further improvements include a programmed interface by which data on a group of shares may be read from a spreadsheet formulated into an order and launched automatically or in response to a signal from an operator so as to trade an index or basket of shares substantially instantaneously. Krala (1993) in his book on Stock exchange listing choice summarized that we use a rational expectations model to examine how public disclosure requirements affect listing decisions by rent-seeking corporate insiders, and allocation decisions by liquidity traders seeking to minimize trading costs. He noted that exchanges competing for trading volume engage in a "race for the top" where under disclosure requirements increase and trading costs fall. The result obtained is robust to diversification incentives of risk-averse liquidity traders, institutional impediments that restrict the flow of liquidity, and listing costs. Under certain conditions, unrestricted liquidity flows to low disclosure exchanges. The consequences of cross-listing also are modeled. Biddle (1994) in his write-up on Financial Disclosure Levels and Foreign Stock Exchange Listing Decisions was of the opinion that firms are increasingly listing their shares on foreign stock exchanges. However, not all exchanges have had equal appeal. Anecdotal evidence suggests that when firms are making foreign listing decisions, they are influenced by financial disclosure requirements. As a result, regulatory authorities around the globe are weighing increasing demands for foreign capital and investment opportunities against the desire to protect domestic investors from possibly misleading foreign financial disclosures. The competitiveness of domestic stock exchanges often hangs in the balance. This study examined a key question in this debate: whether firms' choices regarding alternative foreign stock exchange listings are influenced by financial disclosure levels. Examined are the listings of 302 internationally traded firms with at least one foreign listing, on one of nine major exchanges, as of year-end 1987. Also examined are changes in listings between 1981 and 1987, an important design feature since these changes are more likely to have been influenced by differences across countries in financial disclosure levels during this period. Financial disclosure levels are obtained from a survey of 142 experts actively involved in the foreign listing process.
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Test results based on the cross-section of listings at year-end 1987 are consistent with the hypothesis that exchange choices are influenced by financial disclosure levels. However, they do not lend support to a second hypothesis suggesting that this effect should operate only for firms whose domestic disclosure levels are lower than those of a given foreign exchange. Tests based on changes in listings between 1981 and 1987 support both hypotheses. Overall, the results lend credence to concerns expressed by regulatory authorities and exchange officials that stringent disclosure levels could reduce access to foreign capital and foreign investment opportunities. Kumar (1997) in her article on the question Does an electronic stock exchange need an upstairs market? concluded that he examined the Paris Bourse, whose electronic limit order market closely resembles the downstairs markets envisioned by theorists, to test several theoretical predictions regarding upstairs trading. We present direct evidence in support of the Grossman (J. Business (1992) 509) prediction that upstairs brokers lower execution costs by tapping into unexpressed liquidity, as actual execution costs upstairs are on average only 20% (35%) as large as they would be if block trades were executed against displayed (displayed and hidden) liquidity in the downstairs limit order book. Consistent with prior analyses, the Paris data also support the Seppi (J. Finance (1990) 73) hypothesis that upstairs brokers certify trades as uninformed. We also find that participants in stocks with less restrictive crossing rules agree to outside-the-quote executions for more difficult trades and at times when downstairs liquidity is lacking. These likely represent trades that could not have been otherwise completed, suggesting that market quality can be enhanced by allowing participants more flexibility to execute blocks at prices outside the quotes. Macey (2000) in his book on the economics of stock exchange This paper investigates the once and future role of listing fees. We consider the theory of listing fees and why such a pricing structure initially evolved. We show how capital market developments have changed the desirability, and even viability, of this pricing structure. We then analyze the economics of listing fees. While providing revenue to the exchange, listing fees impose large (opportunity) costs, and we analyze this trade-off, presenting evidence from the New York Stock Exchange. We also discuss what types of listing requirements make economics sense for exchanges (or perhaps regulators) to impose on companies. Finally we consider whether listing fees will continue to survive. Schwert (2002) in his paper on stock exchange seats are important assets for securities brokers since they provide access to centralized secondary trading markets for corporate securities at a reduced cost. The paper provides empirical evidence on the dynamic behavior of monthly New York and American Stock Exchange seat prices over the 19261972 period. Specifically, evidence is presented which:
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(a) is consistent with a multiplicative random walk model for seat prices; (b) indicates that unexpected changes in the prices of exchange-listed stocks or in the volume of shares traded on the exchange are important new information about the value of seats in each month; and (c) indicates that the market for seats is efficient in assimilating new information and quickly incorporates new information into the prices of seats. In addition, he examined the effect of the infrequent trading of seats on the statistical properties of the models.

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CHAPTER TWO
2.1 Method of data collection

The method of data collection used for this research work is the method of Registration. It is also called secondary data since it was first handled by the data analyst. 2.2 Data collected

The data collected are the stock values for ninth-eight (98) weeks over the years 2007/2008. It comprises of the stock market variables and the all share index for the years in view. 2.3 Definition of Terms

2.3.1 Market capitalization This is a measurement of the size of a business enterprise (corporation) equal to the share price times the number of shares outstanding (shares that have been authorized, issued, and purchased by investors) of a publicly traded company. As owning stock represents ownership of the company, including all its equity, capitalization could represent the public opinion of a company's net worth and is a determining factor in stock valuation. Likewise, the capitalization of stock markets or economic regions may be compared to other economic indicators i.e unemployment rate, quits rate, housing starts, Consumer Price Index (a measure for inflation), Consumer Leverage Ratio, industrial production, bankruptcies, Gross Domestic Product, broadband internet penetration, retail sales, stock market prices, money supply changes. 2.3.2 Market value This is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and may differ in some circumstances. Its also the "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion."

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2.3.3 Market volume This is one of the most commonly quoted data points related to the stock market. Reflecting the overall activity in a stock market, market volume is the business of the market itself: the buying and selling of shares. As such, market volume is an important indicator for traders in analyzing market activity and planning strategy. Market volume is a measure of market liquidity based on the number of shares that are traded over a given period. Market volume data is recorded for individual stocks, their related options chains, and for indices as a whole. Normal market volume for each of these exists as a range, with spikes or dips significantly higher or lower being regarded as an important indicator. Market volume is usually lowest around holidays and shortened trading sessions. 2.3.4 No. Of Deals This is the number of deals on each tool displays the statistics of Forex traders activity in the inventory of every currency pair. The enhance of deals number on the currency pair means the raise of interest to it, the increase in the real volume of trade and the opportunity of sharp motions in the nearest time. The short cut of deals number on the currency pair means negative trade volume variance and the rising probability of a slight sideways trend. In restrained terms a nominal volume of trades, by contrast, may lead to higher volatility of the currency pair, but more often the direct relationship between trading volumes (the number of deals in the currency pair) and the succeeding volatility can be observed.

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CHAPTER THREE
3.0 Data analysis

The table below shows the month average of each stock exchange variable
MONTH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 X1 4.53 5.34 6.38 6.80 7.37 7.83 8.02 8.64 9.00 9.47 9.80 10.01 10.17 10.49 11.58 12.42 12.15 11.73 11.11 11.01 10.20 9.78 9.83 8.63 X2 6.16 10.47 15.43 14.80 12.03 9.30 11.10 11.33 10.96 11.37 11.78 12.06 12.95 15.88 17.36 16.09 14.46 9.65 10.55 8.89 7.86 5.38 3.14 1.40 X3 382.01 760.6 945.03 1008.50 879.85 847.80 871.57 832.68 863.58 1085.25 926.77 973.03 922.64 841.12 1226.54 1162.75 959.32 675.72 914.17 772.90 758.55 557.26 443.05 224.28 X4 7524.05 16698.6 13089.23 14810.88 14036.75 12141.75 12570 11295.5 11600.5 10838.25 11338.33 12769.58 14634.83 15837.8 18509.1 21440.35 19137.6 16055.35 14952.1 15368.98 13386.98 9961.68 7352.08 4569.78 X5 34264.39 39418.47 44896.23 47895.68 50782.15 51284.72 51896.82 54650.83 56508.25 56107.05 56630.75 57365.25 58431.25 58274.17 61827.82 65233.71 62928.81 60361.39 56188.22 55779.77 50668.28 47433.32 46318.63 39783.86

The analysis was run using SPSS 17.0

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Descriptive Statistics

X=

1 n

X
i 1

i = 1,2,3, , n

S.D = =

(X
i 1

X )2 /

n 1
Std. Deviation 2.0967 4.0162 235.4096 3843.5674 7808.6645 N 24 24 24 24 24

Mean X1 X2 X3 9.2621 10.85 826.4571

X4 13330.0021 X5 52705.4092

3.1

Correlations

This is used to show the relationship between the variables. It is computed as

(x,y) = Cov (X,Y) x y Cov (X,Y) = E (XY) - XY

X5 Pearson Correlation X5 X1 X2 X3 X4 1.000 .843 .611 .706 .666 X1 .843 1.000 .211 .328 .457 X2 .611 .211 1.000 .898 .789 X3 .706 .328 .898 1.000 .740 X4 .666 .457 .789 .740 1.000

The stock exchange variables all have a positive correlation with the market value(x2) and market volume(x3) having an almost perfect correlation.

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Model Summary R Model 1 .963 .927 .911 2327.7065 R Square Adjusted Std. Error of R Square the Estimate Change Statistics R Square Change F Change df1 df2 .927 59.959 Sig. F Change 4 19 .000

a Predictors: (Constant), X4, X1, X3, X2 b Dependent Variable: X5

3.2

Coefficients of the multiple linear regression model ()

It is obtained as n

X1
i 1

X2
i 1

X3
i 1

X
i 1

X1
i 1

X 12
i 1

X1 X 2
i 1

X1 X 3
i 1

X X
i 1 1

X
i 1

X
i 1

2 X1

X
i 1

2 2

X
i 1

2 X3

X
i 1

X4

X
i 1
n

X
i 1
n

X1

X
i 1
n

X2

X
i 1
n

2 3

X
i 1

X4

X4
i 1

X 4 X1
i 1

X4X2
i 1

X4X4
i 1

X
i 1

2 4

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Unstandardized Coefficients

Standardized Coefficients

t Sig. 95% Confidence Interval for B

Model 1 (Constant) X1 X2 X3 X4 a Dependent Variable: X5

B Std. Error 16258.047 2450.244 2738.393 284.350 523.260 330.798 9.943 -.211 4.958 .235

Beta 6.635 .000 .735 9.630 .000 .269 1.582 .130 .300 2.005 .059 -.104 -.897 .381

Lower Bound

Upper Bound 11129.627 21386.468 2143.242 -169.109 -.435 -.703 3333.544 1215.629 20.322 .281

Yi = 0 + 1X1 + 2X2 + 3X3 4X4 Yi = 16258.047 + 2738.393X1 + 523.26X2 + 9.943X3 2.11X4

3.3

ANOVA on the variable coefficients

Model 1 Regression Residual Total Sum of Squares 1299484400.736 102946136.722 1402430537.457 df 4 19 23 Mean Square 324871100.184 5418217.722 F 59.959 Sig. .000

a Predictors: (Constant), X4, X1, X3, X2 b Dependent Variable: X5

The test is used to determine the significance of the variable coefficients

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CHAPTER FOUR 4.0 4.1 Summary, Conclusion and Recommendation. Summary

The study uses statistical models to fit-in a multiple linear regression model to stock exchange variables using the Nigerian Stock Exchange (NSE) as case study. The variables include market capitalization, market value, market volume and number of deals. SPSS software was used in the analysis and the results obtained were shown. 4.2 Conclusion

The test revealed that the market value and volume made the major impact in the stocks for the years in view having the greatest and almost perfect correlation of .898. The model obtained is Yi = 16258.047 + 2738.393X1 + 523.26X2 + 9.943X3 2.11X4 which shows a positive trend to some extent and an R2 = .911 indicate some level of association of the stock exchange variables. The Analysis of Variance (ANOVA) showed that at 5% significance level, the stock exchange variables did have an impact on the all share. 4.3 Recommendation

I will strongly recommend that the Nigerian Stock Exchange should work on how to improve the rate of market value and market volume to instill stability of her profitability. place emphasis on reviving the other variables hence they dont die totally. work towards creating some more stock exchange that can strongly compete with the existing ones.

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