Stock portfolio and stock return in Nigeria capital market

Abstract

The study of risk-return relationship and impact on efficient portfolio selection provides valuable insights for both individual and institutional investors in selecting stocks that offer optimal returns with minimal risk. The study examines dynamics of return and risk to portfolio selection for optimal stock return in Nigeria capital market during period January 2013 to December 2022, employing Ordinary Least Squares (OLS) regression method. The study employs a 2 x 3 size-sort methodology to create 30 size-sort portfolios. Source of data for study were gotten from Nigeria exchange group (NGX), Securities and Exchange Statistical Bulletin, and Central Bank of Nigeria (CBN). The findings result reveal small capitalized portfolios performs better with higher returns than big capitalized portfolios showing size effect, while market premium is significant statistically for all portfolios with positive coefficients beta. Hence, it can be recommended that investors should consider small capitalized stocks to build portfolios and considers market premium as an important risk factor to be considered when evaluating variation of stock returns in Nigeria.