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Abstract
This study investigate the relationship between the All Share Index (ASI) as a dependent variable and some selected micro-economic variables, including the Inflation rate, Interest rate, and the Exchange rate, as independent variables using weighted least square (WLS) regression analysis. The ASI is a crucial indicator of overall market performance, reflecting the collective value of all shares traded on a stock exchange. The aim of this research is to examine how changes in the changes in the Inflation rate, Interest rate, and Exchange rate impact the ASI, providing insight into the dynamics of the stock market in response to macroeconomic factors. WLS regression is chosen for its ability to address heteroscedasticity, which may be present in financial data where the variance of errors is not constant across observations. The methodology involves collecting secondary data from Nigerian Bureau of Statistics (NBS) for a period of ten years from 2010 to 2020 on the ASI. Inflation rate, Interest rate, and Exchange rate. By applying WLS regression, The coefficient of determination (R2 statistic) is 0.975 which is better than the value of 0.542 obtained by the ordinary least squares (OLS) for the period under study. Therefore, it implies that 97.5% of the variability in All share index can be explained by the explanatory variables (interest rate, inflation rate, and exchange rate) while the remaining 2.5% can be attributed to other factors that is not under consideration in this study. The correlation coefficient between the dependent variable and explanatory variables (table 2) is 0.987, which indicates a very strong positive linear relationship. The test of overall significance (table 3) is highly significant because p-value is 0.000. Therefore, the model is adequate and fit well to the data.