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Asymmetric Oil Price Shocks and Stock Prices in Nigeria

Awolaja, Gbenga Oladapo and Musa, Dasauki C. (2017): Asymmetric Oil Price Shocks and Stock Prices in Nigeria.

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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.

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