Nigerian Journal of Banking and Financial Issues (NJBFI)

Systematic And Unsystematic Risks On Stocks Selection By Investors: An Empirical Analysis Of Nigerian Stock Exchange

Abstract

This study examines the impact of beta coefficient as a factor which affect the processes of stock selection by investors. The Capital Asset Pricing Model (CAPM) was adopted, using the nature and power of the relationship between the stocks. The study made use of monthly stock returns from 30 selected companies listed on the Nigerian Stock Exchange for the period between 01-04-2014 to 01-04-2019, which involves the monthly index closing values. The work employed 60 months data to calculate the beta coefficients which indicate systematic risk. Time series regression analysis was used in the study. The study describes its effects and the way beta (systematic risk) should be evaluated by investors. In the process of the findings, it was discovered that the study is not supportive of the theory’s basic statement that higher risk (beta) is associated with higher levels of return. The study recommends that emphasis should be focused on the significance of beta coefficient which will not only assist investors in portfolio formation, but will enhance diversification of investment. This will go a long way in enhancing portfolio management which is a prerequisite for sustainable risk reduction.