USING FUNDAMENTAL ANALYSIS TO DETERMINE STOCK PRICES IN NIGERIA 1985-2010
ABSTRACT
The study has been on fundamental analysis and stock prices in Nigeria. The introductory chapter viewed fundamental analysis as a technique in determining the prices of stock in the capital market. The role of stock prices in Nigeria cannot be over emphasized as it is a very useful tool in the management of the macro economy. A right – stock price would serve as a stimulus to the entire economy.
This study also revealed that fundamental analysis makes use of economy, industry and company analysis. The processes of fundamental analysis were also viewed. Using economic analysis to forecast stock price this study has examined some forecasting techniques, which include; the econometric model building and the opportunistic model building.
Furthermore, to test that fundamental factors are determinants of stock prices (stock market index) and can predict stock prices, a rigorous analysis has been carried out using the ordinary least square (OLS) methods of regression and the Cochrane result AR (4) converge after nine (9).  
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
Background of the Study        
1.2    Statement of the Problems            
1.3    Research Questions of the Study        
1.4    Objectives of the Study                
1.5    Hypothesis                 
1.6    Significance of the Study        
1.7    Scope/Limitation of the Study            
CHAPTER TWO: LITERATURE REVIEW
2.1    Literature Review                
2.2    Conceptual Issues                    
2.3    Theory and Model of Stock Pricing     
2.4    Determinant of Stock Price Theory and
Audience Market Force Or The Key
Influence On Equity Prices On The Stock
Exchange                    
CHAPTER THREE: THEORETICAL FRAMEWORK, MODEL SPECIFICATION AND METHODOLOGY
3.0    Introduction                    
3.1    Theoretical Framework                
3.2    Model Specification                
3.3    Methodology                 
3.4    Data Analysis and Technique        
CHAPTER FOUR
4.1    Presentation of Regression Result    
4.2    Regression Result                 
4.3    Result Interpretation            
CHAPTER FIVE: SUMMARY, RECOMMENDATION AND
            CONCLUSION
5.1     Summary                        
5.2     Recommendations                
5.3     Conclusion                            
    Appendix                         
    Bibliography                         CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
    The efficient prices of stock exchange hypothesis profounded by Samuelson and expanded by Fama states that the prices of a such at any given time is equal to the prices (present value of the stream of future dividend that will accrue on the stock prices (Edo, 1970).
    This proportion has been viewed to be inadequate in explaining stock price determination, especially in developing economics. There is a considerable in volume of literature beginning with the finding of Leroy and Porter (1981). Which documents the empirical failure of model.
    In a renewed effort to find a suitable model of stock price determine Carrier (1984). Wen (1988) and others have attempted to include more variable such as exchange speculation risk premium and gross domestic product these various attempt have largely ignored the interplay of exchange force in determining prices of stock.
    In Nigeria a few studies have attempted to explain prices stock exchange determination with little or non reference to stock exchange forces Ayodi (1984) only tests for conforming to stock price changes, to the variation weak hypothesis Ozozo (1985) estimates the relationship between stock price and volume of securities.
    Edo (1999) attempts to examine the empirical role of excess demand in explaining changes in stock prices in Nigeria. Excess demand for stock is perceived to be significant because investors in Nigeria by stocks largely for keeps and in the absence of constant and appreciable supply of stock excess demand develops it impact on stock prices Iyare and Edo (1992). This attitude of investors also goes a long way to explain why expected returns on stock might not adequately explain stock price variation in the developing world.
    Udegbunan and Oaikhenan (1999) posited that fiscal, deficit is a determination of stock prices in Nigeria. They ascertained that the effect of persistent rising deficit on the stock has on adverse  effect of persistent rising.
    Miller and Modigliani (1961) in their hypothesis argued that dividend has no effect on stock prices.
    In an opposing view analysis like Gordon Walter and long insisted that dividend is very relevant as it has a lasting effect on corporate equity (Ezike, 2000).
    Udegbunan and Oarkihenan (1999), concluded by relating stock prices to unanticipated changes in fiscal deficits and a battery for either macroeconomic variables such as inflation rate, money growth interest rate, gross domestic product and industrial product.
1.2    STATEMENT OF THE PRPOBLEMS
    Stock prices in Nigeria has been asserted to have the tendency of going up and down and this effect firms in the stock exchange either positively or negatively the public is perplexed by what it is seen as irrational movement in stock prices its becoming more increasingly clear stock brokers and are no longer largely reacting to instruction given by their client in that they themselves have become major investors and this dictates prices that suit their portfolios (Mobalarin, 1997).
    In a stock exchange dominate by national investors the price of a firm stock reflects its intrinsic value which in turn depends on future as well as current earning and risk but as a result of the smallness of our stock exchanges. The pricing system in most cases do not reflect the true value of a given stock (Alile, 1992). Although the prices of an individual firm expected cashflow economic growth (GDP) inflation, interest rate etc. influence the level of stock prices by affecting the expected cashflow of all firms as well as the rate used to discount these cashflow.
    According to Defina (1991) the fall in stock in stock prices as inflation accelerates has resulted in languishing of stock and has made firms less profitable other problem. Have to do with the ignorance on the part of most number of the public as to the meaning of shares, and stock and the resistance of investment to relinquish control of their savings for long period.
    In the light of all above mentioned, in order to estimate the general behaviour of stock prices in Nigeria. This factor responsible for stock price movement will be identified and they include for this study, inflation, GDP, interest rate, money supply and fiscal deficit. These factors used to be identified since the constant movement in stock price has increased the uncertainty in the stock exchange and to a large extent has made many companies loss profitable. We also see a situation where the true value of a given stock exchange is distorted due to the pricing system. One therefore ask helplessly using a company in decline has a high price or a high price system earning ration (P/E return) while a company that is performing well has a price or low P/E ration?
1.3    RESEARCH QUESTIONS OF THE STUDY
    In the course of this work the following questions would be asked.
What is the relationship between fundamental factors such as earning per share, gross domestic product, interest rate, political stability on stock prices and price weighted index..
What  is the impact of the fundamental factors on stock price movement in Nigeria.
1.4    OBJECTIVES OF THE STUDY
    This study is aimed at;
To investigate the impact of the fundamental factors on stock price movement in Nigeria.
To investigate of a relationship exist between the fundamental factor such a earnings per square, gross domestic product, interest rate, political  stability etc on stock price movement in Nigeria.
1.5    HYPOTHESIS
    The hypothesis put up in carrying out this research work is;
Ho:    Fundamental factors do not determine stock prices in Nigeria.     
Hi:    Fundamental factors determine stock prices in Nigeria.  
1.6    SIGNIFICANCE OF THE STUDY
Many studies have been carried out to determine the cause of stock price movement in Nigeria.
Uzoage and Alozenwa (1973) tested for the correlation between earning per share and stock price movement in Nigeria.
However, this study will cover the year 1985 – 2010 to determine how fundamental analysis affect the movement of stock prices in Nigeria.
It is expected that the findings and recommendations of this study will be beneficial to the Nigerian economy.
This research work will also add more knowledge to government, investors, bank managements and other financial institutions.
1.7    SCOPE/LIMITATION OF THE STUDY
    Basically this study covers 1985-2010 a period of (0 – 25) years.
    The scope will be limited to the Nigerian economy using fundamental analysis to impacts stock prices in Nigeria.
    Like every research work this work has certain limitation, then includes inadequate finance for transportation an having to reach various floor of the Nigeria stock exchange.
    Scanty and unavailability of data, rudeness of some custodians to data, limited time frame which was not enough to analysis the major issues.
Lastly, materials were not so much available so I had to make do with what was available, I wish to say, that the findings of this study would not be a drastically affected as a result of these limitation.