The Stock Market Fluctuations and Consumer Behaviour in Nigeria

Abstract

The stock market is a common feature of a modern economy as it promotes the growth and development of the economy. This paper examines the likely influence of recent stock market fluctuations on consumer behavior and the economy, focusing on wealth effects and consumption. After reviewing the relevant theoretical framework and available empirical evidence, consumption functions are estimated for Nigeria including the influence of financial wealth. The resulting estimates of the marginal propensity to consume out of financial wealth are estimated, allowing for differences in stock market  capitalization, and compared with ones obtained more directly from consumption functions that include stock market prices as an explanatory variable. The overall effects are found to be significant, particularly when relevant international linkage mechanisms are taken into account.

Keywords: Stock market, Fluctuations, Economy, Growth, Development.