Influence of Traditional Cross-border Investment Vehicles on Capital Market Performance: Empirical Evidence from Nigeria and Kenya


Published: 2023-03-13

DOI: 10.56557/jet/2023/v8i18151

Page: 18-30

Daniel U. Sunday

Department of Banking & Finance, College of Management Sciences, Michael Okpara University of Agriculture, Umudike, Nigeria.

Alex E. Osuala *

Department of Banking & Finance, College of Management Sciences, Michael Okpara University of Agriculture, Umudike, Nigeria.

*Author to whom correspondence should be addressed.


This study evaluated the influence of traditional cross-border investment vehicles on the performance of the Nigerian and Kenyan capital markets, for the period spanning from January 2011 to December 2020. Exchange rate, monetary policy rate (otherwise known as the central bank rate in Kenya), inflation rate, crude oil price and credit rating were used as the traditional cross-border investment vehicles while capital market performance was proxied by All Share Index. Ex post facto research design was used in a multiple regression analysis framework to determine the partial effects of the endogenous variables on the explained variable. Pretesting was done using the Augmented Dickey-Fuller method to establish the stationarity of the model variables.  The test showed that the data series were of mixed order of integration which necessitated the application of the Autoregressive Distributed Lag (ARDL) model. The ARDL bounds test indicated that the influence of traditional cross border investment vehicles on the performance of the Nigerian and Kenyan Capital markets was bound by a long-run relationship. Specifically, the long-run estimates showed that, whereas the Nigerian capital market was significantly affected by the dynamics of exchange rate and monetary policy more than Kenya, the Kenyan capital market was affected the most by the crude oil price changes and inflation than Nigeria. In terms of credit rating, the Nigerian capital market was largely negatively affected whereas Kenya seemed less volatile. Regarding the speed of adjustment to disequilibrium, it was observed that all the models exhibited an automatic adjustment to equilibrium after very short-run shock. The study concluded that traditional cross border investment vehicles had huge impact on the performance of the two markets and therefore recommended among others that, all the stakeholders should make concerted efforts towards improving the investment climates of East and West African leading stock markets.

Keywords: Investment vehicles, capital markets, volatility, cross-border investment

How to Cite

Sunday, D. U., & Osuala, A. E. (2023). Influence of Traditional Cross-border Investment Vehicles on Capital Market Performance: Empirical Evidence from Nigeria and Kenya. Journal of Economics and Trade, 8(1), 18–30.


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