We find an asset pricing model which consists of the market portfolio, the market skewness or co‐skewness factors, and portfolio idiosyncratic volatility factor best explains portfolio risk‐return trade‐offs on the Nigerian Stock Exchange (NSE), indicating this model is appropriate for studies of semi‐strong form efficiency of the Nigerian Stock Market. Our finding that an asset pricing model which consists of the market portfolio alone tends to consistently understate portfolio risk indicates this conventional one‐factor specification of the CAPM is inappropriate for tests of the efficiency of the Nigerian Stock Market. With respect to the effects of non‐synchronous trading of stocks on portfolio risk‐return trade‐offs, while the presence of non‐synchronous trading induces greater diversification benefits for investors, we find it simultaneously results in a higher price for market risk; that is, higher levels of risk aversion. Our findings demonstrate preference for market skewness or co‐skewness can be a risk mitigating response to anticipated adverse effects of changes in the risk of the market portfolio on portfolio returns.

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I find that policies targeted at stabilizing exchange rates within the context of Nigeria's managed floating exchange rate regime have not allowed for direct inflation targeting. In spite of this constraint, which is predicted by and consistent with macroeconomic theory, however, interactions between financing and investment activities within the Nigerian economy have resulted in a decrease in inflation levels that is traceable to price substitution strategies facilitated by import-related activities. This decrease in inflation levels has been realized in spite of the fact that changes in the demand for investment financing have dissimilar effects on future realizations of inflation and exchange rates; that is, exacerbate policy constraints. My findings provide evidence that while the adoption of managed floating or hybrid exchange rate regimes renders direct inflation targeting difficult, the combination of exchange rate stability, price stability, and lower inflation levels (relative to some origin point) remains achievable in such economies.