An Empirical Pricing of Interest and Exchange Rate Risk-Premia Over A Cross-Section of Portfolio Returns in Nigeria

This study examines whether interest rate and exchange rate exposures command risk premia across Nigerian equity portfolios. Six value-weighted portfolios are formed through independent size and book-to-market sorts using monthly price returns from July 2016 to December 2025. A two-pass framework combines time-series exposure regressions with Fama-MacBeth cross-sectional pricing tests. Newey-West statistics and a separately reported Shanken correction assess inference, while equity factors provide benchmark comparisons. Interest rate exposure is significantly negative for several portfolios in the macro-only specification; significant exchange rate exposure is confined to one portfolio. These relationships generally weaken after equity-factor controls. Neither macroeconomic risk commands a statistically significant cross-sectional premium after correcting for estimated-beta uncertainty. Estimated premia change sign when the cross-sectional intercept is restricted, and rolling estimates indicate changing exposures. The findings distinguish portfolio sensitivity from reliable compensation for bearing risk. Investors should monitor interest rate and currency exposures alongside conventional equity risks without assuming that additional exposure generates higher expected returns. The small portfolio cross section, exclusion of dividends and measurement limitations qualify the conclusions.

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Publication Details

Journal
International Journal of Social Science and Human Research
Published
2026-10-31
DOI
https://doi.org/10.47191/ijsshr/v9-i10-66
Primary Topic
Financial Markets and Investment Strategies
Type
article
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article

An Empirical Pricing of Interest and Exchange Rate Risk-Premia Over A Cross-Section of Portfolio Returns in Nigeria

Akinyemi Akindele Akintan, Joy Ejighomegba Omorojor, Owoputi James Ayodele PhD, AKINYELE OLUGBENGA EBENEZER
International Journal of Social Science and Human Research
Financial Markets and Investment Strategies
article

An Empirical Pricing of Interest and Exchange Rate Risk-Premia Over A Cross-Section of Portfolio Returns in Nigeria

Akinyemi Akindele Akintan, Joy Ejighomegba Omorojor, Owoputi James Ayodele PhD, AKINYELE OLUGBENGA EBENEZER
article en

Abstract

This study examines whether interest rate and exchange rate exposures command risk premia across Nigerian equity portfolios. Six value-weighted portfolios are formed through independent size and book-to-market sorts using monthly price returns from July 2016 to December 2025. A two-pass framework combines time-series exposure regressions with Fama-MacBeth cross-sectional pricing tests. Newey-West statistics and a separately reported Shanken correction assess inference, while equity factors provide benchmark comparisons. Interest rate exposure is significantly negative for several portfolios in the macro-only specification; significant exchange rate exposure is confined to one portfolio. These relationships generally weaken after equity-factor controls. Neither macroeconomic risk commands a statistically significant cross-sectional premium after correcting for estimated-beta uncertainty. Estimated premia change sign when the cross-sectional intercept is restricted, and rolling estimates indicate changing exposures. The findings distinguish portfolio sensitivity from reliable compensation for bearing risk. Investors should monitor interest rate and currency exposures alongside conventional equity risks without assuming that additional exposure generates higher expected returns. The small portfolio cross section, exclusion of dividends and measurement limitations qualify the conclusions.

International Journal of Social Science and Human ResearchVol. 09(10)
Lagos State University (NG), Federal University of Technology (NG), Rufus Giwa Polytechnic (NG), Lagos State University of Education (NG)
Openalex Percentile: Top 10%
Financial Markets and Investment Strategies
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An Empirical Pricing of Interest and Exchange Rate Risk-Premia Over A Cross-Section of Portfolio Returns in Nigeria — Akinyemi Akindele Akintan, Joy Ejighomegba Omorojor, et al. · International Journal of Social Science and Human Research (2026) | TGRS Research Map | TGRS