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Stock market prices and exchange rates in Nigeria: insights from a nonlinear and asymmetric analysis

Author

Listed:
  • James Temitope Dada
  • Clement Olalekan Olaniyi
  • Emmanuel Olayemi Awoleye
  • Mamdouh Abdulaziz Saleh Al-Faryan

Abstract

This study examines the asymmetric structure (good and bad news) inherent in both stock market prices and exchange rates in Nigeria by using monthly data between January 1986 and December 2019. This study uses a nonlinear autoregressive distributed lag model and asymmetric causal approach within bootstrap simulations with leverage adjustments. The finding shows evidence of a long-run relationship between the variables. Positive and negative shocks (appreciation and depreciation) in the exchange rates hurt stock market prices, while shocks (good and bad news) in stock market prices positively affect the exchange rates. A unidirectional causality from exchange rates to stock market prices was found, thus supporting the traditional approach (flow-oriented) to exchange rates-stock market prices nexus. The study concludes that there is evidence of asymmetric structures in the relationship between stock market prices and exchange rates in Nigeria.

Suggested Citation

  • James Temitope Dada & Clement Olalekan Olaniyi & Emmanuel Olayemi Awoleye & Mamdouh Abdulaziz Saleh Al-Faryan, 2024. "Stock market prices and exchange rates in Nigeria: insights from a nonlinear and asymmetric analysis," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 16(4), pages 453-476.
    • Handle: RePEc:ids:ijbema:v:16:y:2024:i:4:p:453-476
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