| This paper uses a VAR model and Granger Causality testing to examine how the growth rate of stock market development helps predict the growth rate of the economy in Nigeria. The study makes use of quarterly time series data for the period 1980 to 2004. Empirical results show that for Nigeria, stock market growth and economic development have a long-run equilibrium relationship. It reveals that economy fluctuations do help to predict the future stock market trends. The result reveals that Real GDP has a significant relationship with stock market capitalization and total value of shares traded. Overall, it is found that the effects of changes in the stock market are reflected in the Nigerian economy with a lag of four years. |
