Title: Stock market prices and exchange rates in Nigeria: insights from a nonlinear and asymmetric analysis

Authors: James Temitope Dada; Clement Olalekan Olaniyi; Emmanuel Olayemi Awoleye; Mamdouh Abdulaziz Saleh Al-Faryan

Addresses: Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria ' Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria ' Department of Economics, Hallmark University, Ijebu-Itele, Nigeria ' School of Accounting, Economics and Finance, Faculty of Business and Law, University of Portsmouth, UK; Consultant in Economics and Finance, Riyadh, Saudi Arabia

Abstract: This study examines the asymmetric structure (good and bad news) inherent in both stock market prices and exchange rates in Nigeria by using monthly data between January 1986 and December 2019. This study uses a nonlinear autoregressive distributed lag model and asymmetric causal approach within bootstrap simulations with leverage adjustments. The finding shows evidence of a long-run relationship between the variables. Positive and negative shocks (appreciation and depreciation) in the exchange rates hurt stock market prices, while shocks (good and bad news) in stock market prices positively affect the exchange rates. A unidirectional causality from exchange rates to stock market prices was found, thus supporting the traditional approach (flow-oriented) to exchange rates-stock market prices nexus. The study concludes that there is evidence of asymmetric structures in the relationship between stock market prices and exchange rates in Nigeria.

Keywords: stock market prices; exchange rates; good news; bad news; Nigeria.

DOI: 10.1504/IJBEM.2024.141727

International Journal of Business and Emerging Markets, 2024 Vol.16 No.4, pp.453 - 476

Received: 26 Jul 2022
Accepted: 14 Jun 2023
Published online: 01 Oct 2024 *

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