MACROECONOMIC INFLUENCES ON GROWTH STOCK VALUATION: EVIDENCE FROM THE NIGERIAN CAPITAL MARKET

Abstract

This study investigates the macroeconomic influences on the valuation of growth stocks listed on the Nigerian Exchange Group (NGX) between 2018 and 2022. Using an ex-post facto research
design, the study analyzed secondary data from 21 purposively selected growth-oriented firms.
Multivariate regression analysis was employed to examine the relationships between inflation rate,
stock returns, and growth stock performance. The findings reveal a significant negative relationship
between inflation and growth stock value, indicating that higher inflation rates erode investor
confidence and reduce growth stock valuations. Conversely, stock returns exhibited a significant
positive effect on the value of growth stocks, with results suggesting that a 1% increase in stock
returns leads to a 313% increase in growth stock valuation. This highlights the strong influence of
market performance on growth-oriented investments. The study emphasizes the importance of macroeconomic stability, particularly effective inflation control, to sustain investor interest and enhance capital market performance. The findings align with the Efficient Market Hypothesis and support prior empirical literature on the sensitivity of growth stocks to macroeconomic variables. Policymakers are advised to implement strategies that stabilize inflation, while investors are encouraged to consider stock return trends when evaluating growth stock investments in inflationary environments.