MARKET MICROSTRUCTURE AND THE NIGERIAN STOCK MARKET
Uhunmwangho Monday and Obayagbona Joel
Volume 1 Issue 1
Abstract
Bis-ask spread as trading cost influence stock return and therefore constitute a risk to investors in the capital market. For this reason, this paper reviewed market microstructure models and examine the effect of bid/ask spread as trading cost on stock return in Nigerian capital market,using daily data of 12 banking stocks for the period 2nd December 2019 to 13th December, 2019. Data was collected from the Nigerian Stock Exchange daily official list. The Fixed effect panel regression was implemented using E-view 9.0 computer software. The result reveals that bid-ask spread positively and significantly influence stock price in the Nigerian stock market. The study concludes that bid-ask spread constitute cost to trading and impact stock return in Nigeria. Based on the finding, the study recommends that investors should pay devoted attention to bid-ask spread as trading cost because of the potential it holding in influencing investment returns; and that the Security and Exchange Commission as regulatory authority should ensure a more transparent trading platform with a view to mitigating the implicit cost of trading. Keywords: Bid-Ask Spread, Dynamic Fixed Effect Regression, Market Microstructure, Nigerian Stock Exchange.
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