Empirical Analysis of the Risk-Return Characteristics of the Quoted Firms in the Nigerian Stock Market
This study empirically investigates the risk-return dynamics of the Nigerian quoted firms for the period of 2000 – 2004 as monthly. The objective of study is to establish what determines the systematic risk (beta) of firms, the magnitude of such risk (beta) associated with returns in the Nigerian Stock Market. This study employed Ordinary Least Squares (OLS) procedure to estimate the regression in order to obtain the systematic risk (beta) of each of the firm. In addition, market model was used to estimate returns of the firms. This study revealed that the sizes of risks (betas) are different in firms studied; they varied positively with the sizes of returns. In addition, 65% of the firms’ risk (beta) is statistically significant at 1% and 5% level and most of the firms’ risks (betas) are less than Unity, which imply lower risk as compared to Market Portfolio. More importantly, most of firms’ betas are positive; suggesting limited scope for diversification in the Nigerian Stock Market. The outcome of this study conformed to similar studies in the emerging stock markets.
