OIL PRICE VOLATILITY AND STOCK MARKET RETURNS IN NIGERIA

IFUERO OSAD OSAMWONYI, NEWMAN OSAKIOYAIGBINOBA

Abstract


The objective of this study is to investigates the impact of oil price volatility on stock market return in Nigeria. The analysis was carried out using the Vector Error Correction Mechanism (VECM); data covering the period 1980 to 2012, a dynamic framework was created in the analysis including the test for stationarity, cointegration and Granger Causality. The Granger causality test was carried out to determine the cause-effect relationship
between oil price volatility and other variables and stock market instability in Nigeria. The major analysis involved the estimation of the dynamic patterns of adjustment in oil price volatility with respect to stock market instability within the VECM context. The major findings of this study show that the perceived deleterious effects of oil price fluctuations in the stock market are substantive, and that oil price instability has extensive negative effects on stock returns in the short run, and intensifies volatility in the market in the long run. In the same vein, externally determined factors were shown to play more active roles in stock price volatility in Nigeria. We therefore recommend that policies to stabilize the operations of the stock
market as well as improve the macroeconomic operating environment for a healthy and robust stock market performance be put in place. This paper is expected to enhance stock market return in Nigeria.


Keywords: Oil Price, Volatility and Stock market

Full Text:

PDF

Refbacks

  • There are currently no refbacks.


International Journal of Management Science Research ISSN ISSN 2536 – 605X(Print)

Copyright: All rights reserved. No parts of this journal may be reproduced in any form; be it electronic, mechanic, photocopying, recording or otherwise without the prior written permission of the publisher.

To make sure that you can receive messages from us, please add the 'ijmsr.net' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders…