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Oil Price Shocks and Sectoral Stocks Behaviour in Nigeria: How Relevant is Asymmetry and Structural Breaks?
Ismail Fasanya
University of the Witwatersrand Business School
Corresponding Author
ORCiD: https://orcid.org/0000-0001-5816-4815
License:
This work is licensed under a CC BY 4.0 License. Read Full License
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
Keywords
Oil price, Sector returns, Asymmetry, Structural breaks, Nonlinear models
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CURRENT STATUS: Under Review
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Posted 16 Jun, 2020
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On 27 Jan, 2021
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On 13 Jun, 2020
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This preprint is under consideration at Journal of Economic Structures. A preprint is a preliminary version of a manuscript that has not completed peer review at a journal. Research Square does not conduct peer review prior to posting preprints. The posting of a preprint on this server should not be interpreted as an endorsement of its validity or suitability for dissemination as established information or for guiding clinical practice.
Learn more about In Review
Research
Oil Price Shocks and Sectoral Stocks Behaviour in Nigeria: How Relevant is Asymmetry and Structural Breaks?
Ismail Fasanya
University of the Witwatersrand Business School
Corresponding Author
ORCiD: https://orcid.org/0000-0001-5816-4815
Badges
Prescreen
This manuscript passed our Prescreen assessment
Complete author information
Appropriate declaration statements
Potential risks to human health
Prescreen
Peer Review Timeline
CURRENT STATUS: Under Review
Version 1
Posted 16 Jun, 2020
No community comments so far
Reviewers invited
Invitations sent on 27 Jan, 2021
Reviewer #1 agreed
On 27 Jan, 2021
Editor assigned
On 14 Jun, 2020
Submission checks complete
On 13 Jun, 2020
Editor invited
On 13 Jun, 2020
First submitted
On 10 Jun, 2020
Metrics
Comments: 0
PDF Downloads: ...
HTML Views: ...
Subject Areas
Other Economics
License:
This work is licensed under a CC BY 4.0 License. Read Full License
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
Figure 1
Due to technical limitations, full-text HTML conversion of this manuscript could not be completed. However, the manuscript can be downloaded and accessed as a PDF.