Idris Akanbi Ayinde, Abiodun Olayinka S. Ayanwale, Musediku A. Shittu and Razak Olufemi Kareem
Given the potential of the stock market to provide required capital for agro-based companies, a time series analysis of the performance of major agricultural-based companies in…
Abstract
Purpose
Given the potential of the stock market to provide required capital for agro-based companies, a time series analysis of the performance of major agricultural-based companies in the Nigerian stock exchange (NSE) was carried out.
Design/methodology/approach
Monthly records of volume of shares traded (VOL) as well as its determinants – current market price (CMP), dividend (DIV), earnings per share (EPS), price-earning ratio (PER), earning yield (EARN) and dividend yield (YIELD) were obtained from the NSE as indicators of performance through 11 years (1998-2008). Non-stationarity of the variables under consideration led to re-conceptualisation of the model as a vector autoregressive (VAR) system. Existence of more than one co-integrating vector in the data through the Johansen test, led to estimation of restricted VAR using the Vector Error Correction Model (VECM) imposing normalisation of VOL and PER.
Findings
The result of the analysis revealed that VOL is positively related to YIELD and CMP while it is inversely related to EARN, EPS and DIV. On the other hand PER increases with increasing EPS and DIV but reduces with increase in EARN and CMP. Short-run adjustment coefficients were generally large ranging from four months to ten years.
Research limitations/implications
However, variables coefficients were more elastic in the long run.
Originality/value
This paper is an original article and has not been done by any other researcher. Furthermore, this paper has not been submitted to any other publishing house prior to this.