CHAPTER ONE

INTRODUCTION

1.1 Background to the study

The capital market in any country is one of the major pillars of long term economic growth and development. The market serves a broad of clientele including different level of government, corporate bodies and individuals within and outside the country. For quite some time now, the capital markets generally, are believed to be heart beat of the economy given their ability to respond almost instantaneously to fundamental changes in the economy (Maku & Atanda, 2010). The capital market is known as the equity or stock market and is one of the important areas of a market economy as it provides access to capital to companies, ownership in the company for primary investors and the potentials of gains based on the rms future performance for secondary investors (Osoro,2013). Returns from such equity investments subject to vary owing to the movement of share prices, which depends on various factors which could be internal or rm special such as earning per share, dividends and book value or external factors such as interest rate, GDP, Nation, government regulations and foreign exchange rate (Omodero & Ekwe,2016).Capital market performance is the indicator of stock market as whole. It gives signal to the investors about their future moves. The movement in the price of the stock and the indexes gives the idea of the near future trend of the stock or sector as a whole (Maku & Atanda, 2010). As financial domain is the most important one of an economy, so the capital market performance works as an indicator of the overall health of the economy. Capital market indexes typically gives the overall performance of the market, indexes react the performance of the economy (Barako, 2007). Stock price is used as a benchmark or an indicator of the performance of a stock and if the price of a particular stock is rising, then it is perceived that it has certain positive news or signals.

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