GLOBALIZATION AND THE PERFORMANCE OF THE STOCK MARKET: EVIDENCE FROM NIGERIA
DOI:
https://doi.org/10.5281/zenodo.23414678Keywords:
Globalization; financial integration; stock-market performance; sector-panel data; exposure-based identification; Nigeria.Abstract
Greater integration with global trade and capital markets can affect domestic equity markets through channels that need not move together. This paper examines how trade openness, foreign direct investment (FDI), foreign portfolio investment (FPI), legal financial openness and exchange-rate exposure relate to Nigerian stock-market performance using sector-level exposure differences. Each global variable is interacted with a predetermined sector exposure measure and estimated with sector and time fixed effects, so that common time shocks are absorbed and identification comes from differential sector responses. The analysis uses average-effects fixed-effects models as benchmarks and adds targeted heterogeneity, structural-break, distributional, dynamic and inference checks. The balanced panel comprises 12 sectors and 64 quarters covering 2010Q1–2025Q4. Exposure-interaction estimates are significant for the six principal globalization channels; the exchange-rate relationship is stronger after 2016Q3 (-0.11 before versus -0.47 after; equality p < 0.001). A global-conditions threshold is not detected at 5% (bootstrap p = 0.065), asymmetry between portfolio inflows and outflows is not detected (p = 0.599), and quantile slopes do not differ significantly across the return distribution. The portfolio-flow coefficient is sensitive to the covariance estimator. The paper provides a sector-panel identification strategy that distinguishes common globalization shocks from differential sector exposure and evaluates the resulting estimates with targeted robustness and inference checks.
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