Research Objective: This study focused on examining the effect of the Multi-Factor Asset Pricing Model on financial assets returns in the Nigerian stock market from 1990 to 2022.
Methodology: Secondary data were sourced from the Central Bank of Nigeria, Nigeria Bureau of Statistics, and World Bank publications. The data were analyzed using the error correction mechanism (ECM) technique, with fiscal policy variables (government expenditures, GDP per capita, inflation rate, interest rate) as exogenous factors and market capitalization as the endogenous variable.
Findings: The Johansen cointegration tests revealed a long-run relationship between the Multi-Factor Asset Pricing Model and financial asset returns. The study also found that short-run disequilibrium in financial asset returns could be corrected at a rate of 37.43% in the long run.
Conclusion: The Multi-Factor Asset Pricing Model is a key determinant of financial asset returns in the Nigerian stock market.
Recommendations: The study recommends that the government and its agencies should implement policies to boost per capita income, improve fiscal policy execution, manage interest rates, and reduce inflation to enhance security returns in the Nigerian stock market.
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