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Oil Price Shocks and Sectoral Stocks Behaviour in Nigeria: How Relevant is Asymmetry and Structural Breaks?

Article scientifique 2020 Anglais

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Abstract In this paper, we model the relationship between oil price and stock returns for selected sectors in Nigeria using monthly data from January 2007 to December 2016. We employ both the Linear (Symmetric) ARDL by Pesaran et al. (2001) and Nonlinear (Asymmetric) ARDL by Shin et al. (2014) and we also account for structural breaks using the Bai and Perron (2003) test that allows for multiple structural changes in regression models. Our results indicate that the strength of this relationship varies across sectors, albeit asymmetric and breaks. We identify two structural breaks that occur in 2008 and 2010/2011 which coincidentally correspond to the global financial crisis and the Arab spring (Libyan shut-downs), respectively.Moreover, we observe strong supportfor asymmetry and structural breaks for some sectorsin the reaction of sector returns to movement in oil prices.These findings are robust and insensitive when considering different oil proxy.While further extensions can be pursued, the consideration of asymmetric effects as well as structural breaks should not be jettisoned when modelling this nexus.JEL codes: C22; C51; G12; Q43

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Fasanya, I., Adekoya, O., Odudu, T. (2020). Oil Price Shocks and Sectoral Stocks Behaviour in Nigeria: How Relevant is Asymmetry and Structural Breaks?. https://doi.org/10.21203/rs.3.rs-35210/v1

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Ismail O. Fasanya Oluwasegun B. Adekoya Temitope F. Odudu

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