This study empirically examined the impact of macroeconomic variables (exchange rate, gross domestic product, inflation and interest rate) on stock market prices in Nigeria using quarterly time series data covering the period 1989; 1 to 2018; 3. The econometric technique employed in the research is the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model. The econometric analysis began with pre-diagnostic test which is a pre-condition for estimating GARCH model (testing for clustering volatility and ARCH effect in the residual). Properties of the time series variables were examined and tested for stationarity using the Augmented Dickey-Fuller (ADF) unit root test. The test revealed that all the variables; all share index, exchange rate, gross domestic product, inflation and interest rate were stationary at either level I(0) or at first difference I(I). The conditional variance equation of the GARCH model revealed that GDP has positive effect on stock prices while other macroeconomic variables have negative effect on stock return volatility. The study found that stock prices is more responsive to their lag values than the variables of exchange rates, gross domestic product, inflation and Interest rate; and therefore, the study recommends the following: That Government should always embark on policies that will lead to substantial growth in the real gross domestic product; ensure that a decrease in interest rate is also accompanied by an increase in investment. Thus, interest rate should be guided by the relevant authority through a preferred range for investing firms; and finally ensure a relatively stable exchange rate and keep Inflationary trend at a single digit.
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