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Predictability of Stock Price on Nigeria Stock Exchange

In: Business and Management

Submitted By adebayoadisa
Words 11803
Pages 48
predictability
CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

The performance of an economy is dependent largely on the efficient performance of its financial markets, since they facilitate the financing of productive activity and hence national output and economic growth. In this research report, the key roles and function of the financial markets are highlighted with the thrust of the discussion on the core issue of how the market works; directly and indirectly.
One of the most important factors for rapid economic development is the effective mobilization and allocation of scarce resources within an economy. These resources can be real or financial, but they are scarce and command a price. The establishment of effective and efficient channel for the mobilization and allocation of scarce financial resources is therefore essential.

The financial market, comprising of the money and capital markets, occupies an important place in most economies of the world. The primary function of a financial market is to enable funds to be sufficiently allocated from the surplus units of the economy to the deficit units for productive investment. The greater the transmission efficiency is, the higher the rate of growth of the economy (Olowe, 1997).

The money market trades only in securities or debt instruments maturing in less than twelve months, while in the capital market, longer term debts as well as equity instruments are traded. The complementarity between money market and capital market is necessary for a balanced development of the financial system. (NSE Fact Book 2010)
The money market is a market for the mobilization, allocation and trading in short-term funds. It is, thus, a market for trading in short-term financial instruments. The major participants in the money market include individuals, companies, banks, discount houses and government.

The...

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