RISK-RETURN RELATIONSHIP OVER MARKET PHASES IN NIGERIAN STOCK MARKET

OMOROJOR, Joy Ejighomegba
Department of Business Education
College of Vocational and Entrepreneurship Education,
Lagos State University of Education, Lagos, Nigeria.
omorojorje@lasued.edu.ng
AREWA, Ajibola
Department of Finance
Faculty of Management Sciences,
Lagos State University, Lagos, Nigeria.
ajibolaarewa@yahoo.com
OGUNLANA, Fatai Olarewaju
Department of Economics
Faculty of Management Sciences,
Lagos State University, Lagos, Nigeria.
olarewaju.ogunlana@lasu.edu.ng
UGWUKA, Nkechi
Department of Finance,
Faculty of Management Sciences,
Lagos State University, Nigeria
ugwukankechi@gmail.com
ABSTRACT
Investment decisions depend basically on risk and return analysis. This study seeks to investigate the risk
return relationship of selected stocks over two different phases in the Nigerian stock market. The main
objective of this study is to identify stock market phases and assist investors in making rational decision in a
period of up and down market. Data is collected from 70 listed companies for a period of 10 years. Data
collected is used to analyze the risk return relationship using descriptive analysis. Capital Asset Pricing
Model (CAPM) was used to determine the expected return of the companies. The results reveal that the
single-factor CAPM is valid in the bullish period and void in the bearish period of Nigeria stock market. The
overview suggests that the explanatory variable (Beta risk factor), using the F-statistics, has 15.88747 (Fstatistic) and a corresponding P-value of zero (0). This simply means that, the beta factor has a significant
influence on average return of securities in the Nigeria stock market for the period. Thus, investors are
recommended to consider the trend of price movement in the market before venturing into any investment.
Keywords: Average return, Capital Asset Pricing Model, Nigerian stock market, risk-return,