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Asymmetric Oil Price Shocks and Stock Prices in Nigeria

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  • Awolaja, Gbenga Oladapo
  • Musa, Dasauki C.

Abstract

The study investigated the relationship between crude oil price, and Banking Sector stock prices in Nigeria from 2009 to 2016, using quarterly data collected from the Central Bank of Nigeria (CBN) and Nigeria Stock Exchange. Index of the Nigeria stock exchange for Banking Sector index was considered as dependent variables. The study implemented nonlinear ARDL (NARDL) which is an asymmetric extension of the standard co-integration test and the standard ARDL. The NARDL was applied to determine asymmetric effect of crude oil price shocks on stock prices. Findings from the analysis indicated the presence of long-run co-integration in most cases and that positive and negative oil price shocks have differential effects on banking sector index than negative oil price shocks of the same magnitude. Oil price shocks completely transmitted to the sector. The study concluded that there should be close monitoring of the banking sectors as well as appropriate policy actions to curtail systematic risk in the sector since oil price shocks transmits to oil and gas share prices listed on the Nigeria Stock Exchange.

Suggested Citation

  • Awolaja, Gbenga Oladapo & Musa, Dasauki C., 2017. "Asymmetric Oil Price Shocks and Stock Prices in Nigeria," MPRA Paper 92891, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:92891
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    File URL: https://mpra.ub.uni-muenchen.de/92891/1/MPRA_paper_92891.pdf
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    References listed on IDEAS

    as
    1. Maku, Olukayode E. & Atanda, Akinwande A., 2009. "Does Macroeconomic Indicators exert shock on the Nigerian Capital Market?," MPRA Paper 17917, University Library of Munich, Germany.
    2. Mohamed El Hédi Arouri & Philippe Foulquier & Julien Fouquau, 2011. "Oil Prices and Stock Markets in Europe: A Sector Perspective," Recherches économiques de Louvain, De Boeck Université, vol. 77(1), pages 5-30.
    3. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    4. Katrakilidis, Constantinos & Trachanas, Emmanouil, 2012. "What drives housing price dynamics in Greece: New evidence from asymmetric ARDL cointegration," Economic Modelling, Elsevier, vol. 29(4), pages 1064-1069.
    5. repec:cup:jdemec:v:77:y:2011:i:01:p:5-30_00 is not listed on IDEAS
    6. Nandha, Mohan & Hammoudeh, Shawkat, 2007. "Systematic risk, and oil price and exchange rate sensitivities in Asia-Pacific stock markets," Research in International Business and Finance, Elsevier, vol. 21(2), pages 326-341, June.
    7. Cheung, Yin-Wong & Ng, Lilian K., 1998. "International evidence on the stock market and aggregate economic activity," Journal of Empirical Finance, Elsevier, vol. 5(3), pages 281-296, September.
    8. Karantininis, Kostas & Katrakylidis, Kostas & Persson, Morten, 2011. "Price Transmission in the Swedish Pork Chain: Asymmetric non linear ARDL," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114772, European Association of Agricultural Economists.
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    Cited by:

    1. 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.

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    More about this item

    Keywords

    Asymmetry; Nonlinear ARDL; Crude oil price shocks; exchange rate;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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