Capital Market Development and Investor Behaviour in Nigeria

This study examines the relationship between capital market development and investor behaviour in Nigeria over the period 2000–2023, incorporating a comprehensive set of control variables that capture the multidimensional nature of financial market dynamics. Specifically, the analysis accounts for market liquidity (turnover ratio), market volatility (standard deviation of returns), macroeconomic indicators (GDP growth, inflation rate, interest rates), investor demographics (age, income level, education), firm-specific factors (size, profitability, dividend yield), and institutional factors (regulatory changes, investor protection laws). Employing a time series regression framework, the study draws on secondary data from the Nigerian Exchange Group, the Central Bureau of Statistics, the Central Bank of Nigeria, and the Securities and Exchange Commission. Descriptive statistics, correlation analysis, and ordinary least squares regression with robust standard errors constitute the primary analytical tools, supplemented by post-estimation diagnostics including tests for serial correlation, heteroscedasticity, multicollinearity, and structural stability. The findings reveal that market capitalisation ratio and the all-share index exert statistically significant positive effects on investor participation rates, while market volatility and inflation dampen investor engagement. Turnover ratio, as a proxy for liquidity, demonstrates a positive and significant relationship with both domestic and foreign investor activity. Institutional quality variables, particularly regulatory reforms implemented after 2010, show a structural break effect that improved investor confidence. GDP growth and interest rate spread also emerge as significant predictors, though their effects are nuanced and mediated by investor demographic characteristics. The study contributes to the literature by providing an integrated empirical framework that simultaneously addresses market-level, macroeconomic, firm-level, and institutional determinants of investor behaviour in an emerging market context. Policy implications point toward the necessity of deepening market liquidity, strengthening regulatory infrastructure, enhancing investor education, and maintaining macroeconomic stability as preconditions for sustainable capital market development in Nigeria.