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Symmetric and asymmetric effects of crude oil price and exchange rate on stock market performance in Nigeria: Evidence from multiple structural break and NARDL analysis

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  • Kingsley Ikechukwu Okere
  • Obumneke Bob Muoneke
  • Favour Chidinma Onuoha

Abstract

This study explores the linear and non-linear impact of Nigeria's oil price and exchange rate on stock market performance from January 1995 to December 2019 using the non-linear autoregressive distributed lag (NARDL) method. The results from the linear ARDL show a long and short-run positive relationship between the Nigerian stock market and crude oil prices while, the exchange rate show an insignificant in the long-run effect but a significant positive relationship in the short run. The non-linear ARDL front, the tests show that the impact of positive shocks in crude oil price has a significant increasing effect on stock market performance in Nigeria, while negative shocks in crude oil prices have a significant increasing effect on stock market performance. The exchange rate has an insignificant relationship with stock market performance both in short- and long-run asymmetric test. The adjustment asymmetry from the dynamic multiplier graphs shows that the response of stock market performance to a negative change in oil price is stronger than that in response to a positive change. Overall, the result provides the need to diversify investment portfolios through the international equity market, keeping a close watch on the oil price fluctuation which is of importance in formulating risk–return portfolios of stock market performance.

Suggested Citation

  • Kingsley Ikechukwu Okere & Obumneke Bob Muoneke & Favour Chidinma Onuoha, 2021. "Symmetric and asymmetric effects of crude oil price and exchange rate on stock market performance in Nigeria: Evidence from multiple structural break and NARDL analysis," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(6), pages 930-956, August.
    • Handle: RePEc:taf:jitecd:v:30:y:2021:i:6:p:930-956
    DOI: 10.1080/09638199.2021.1918223
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    Citations

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    Cited by:

    1. Kashif Islam & Ahmad Raza Bilal & Syed Anees Haider Zaidi, 2022. "Symmetric and asymmetric nexus between economic freedom and stock market development in Pakistan," Economic Change and Restructuring, Springer, vol. 55(4), pages 2391-2421, November.
    2. Adeel Saleem & Maqbool H. Sial & Ahmed Raza Cheema, 2023. "Does an asymmetric nexus exist between exports and economic growth in Pakistan? Recent evidence from a nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 56(1), pages 297-326, February.
    3. Hassan, Aminu & Ibrahim, Masud Usman & Bala, Ahmed Jinjiri, 2024. "Vulnerability of a developing stock market to openness: One-way return and volatility transmissions," International Review of Financial Analysis, Elsevier, vol. 93(C).
    4. Joseph Chukwudi Odionye & Jude Okechukwu Chukwu, 2023. "Asymmetric Reactions Of Stock Prices And Industrial Output To Exchange Rate Shocks: Multiple Threshold Nonlinear Autoregressive Distributed Lag Framework," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(237), pages 165-191, April – J.
    5. Obumneke Bob Muoneke & Kingsley Ikechukwu Okere & Favour Chidinma Onuoha, 2023. "Extreme exchange rate dynamics and export trade in the selected oil-exporting countries in Africa. Multiple asymmetric threshold non-linear ARDL approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 32(6), pages 854-877, August.
    6. Muhammad Tahir Suleman & Mosab I. Tabash & Umaid A. Sheikh, 2024. "Do stock market fluctuations lead to currency deflation in the South Asian region? Evidence beyond symmetry," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1432-1450, April.
    7. Ayesha Siddiqui & Mohd Shamim & Mohammad Asif & Mamdouh Abdulaziz Saleh Al-Faryan, 2022. "Are Stock Markets among BRICS Members Integrated? A Regime Shift-Based Co-Integration Analysis," Economies, MDPI, vol. 10(4), pages 1-25, April.
    8. Sanusi Yakubu Muhammad & Isah Auwal & Bello Abdulmajeed Kumo & Yusuf Fadimah, 2023. "Oil Price and Stock Market Nexus in Nigeria: An Asymmetric Cointegration Based on Non-Linear Ardl Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 573-591, November.
    9. Kingsley Ikechukwu Okere & Obumneke Bob Muoneke & Favour Chidinma Onuoha & Philip C. Omoke, 2022. "Tripartite relationship between FDI, trade openness and economic growth amidst global economic crisis in Nigeria: application of combined cointegration and augmented ARDL analysis," Future Business Journal, Springer, vol. 8(1), pages 1-23, December.
    10. Rowland Tochukwu Obiakor & Kingsley Ikechukwu Okere & Obumneke Bob Muoneke & Nnamdi Chinwendu Nwaeze, 2022. "Accounting for the symmetric and asymmetric effects of FDI-growth nexus amidst financial crises, economic crises and COVID-19 pandemic: application of hidden co-integration," Future Business Journal, Springer, vol. 8(1), pages 1-15, December.

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