The purpose of this study is to investigate the interactive relationships between oil price shocks and the Nigeria stock market.
The paper applied the multivariate vector auto‐regression that employed the generalized impulse response function and the forecast variance decomposition error.
Empirical evidence reveals that stock market returns exhibit insignificant positive response to oil price shocks but reverts to negative effects after a period of time depending on the nature of the oil price shocks. The results are similar even with the inclusion of other variables. Also, the asymmetric effect of oil price shocks on the Nigerian stock returns indices is not supported by statistical evidences.
This is the first study to examine the dynamic linkages between stock market behaviour and oil price shocks in Nigeria.
