Money Supply and Stock Prices – A Case Study of Nigeria

This study examined the relationship between money supply and stock prices, using E-view version 10. The empirical results of Augmented Dickey Fuller (ADF) unit root test at 5 percent critical levels indicates that all variables (M2 MCAP) were not stationary levels. However, became after first differencing. Hence, are same order integration I (1). A cointegration tells us there exists a long run or among they will wander far apart away even though on short exhibit random walk behavior. Vector Error Correction shows Money (M2) has significant with market capitalization Nigerian exchange. value Adjusted R-Squared 0.726710 implies explained about 72.67% systematic variations in dependent variable (MCAP) over observed years while remaining 27.33% by other determining outside model. In to further establish price, granger causality was carried out it established is bi-directional prices. researcher therefore recommends should be collaboration agencies government charge exchange make sure sound policies made achieve objective government. Furthermore, deliberate concerted policy effort improve line exchanges world, since prices cause vice versa.