The Dynamics of Stock Prices and Exchange Rates: Evidence From Nigeria

West African Journal of Monetary and Economic Integration, 2012

Posted: 13 Dec 2019

See all articles by Dr. Olusegun A. Omisakin

Dr. Olusegun A. Omisakin

The Nigerian Economic Summit Group (NESG); Independent

Mutiu Abimbola Oyinlola

University of Ibadan - Department of Economics

Oluwatosin Adeniyi

University of Ibadan - Faculty of Public Health

Date Written: November 27, 2012

Abstract

This paper probed the long-run and short-run dynamics between stock prices and exchange rates in Nigeria using the Johansen and Gregory-Hansen cointegration analyses, causality test and Exponential General Autoregressive Conditional Heteroskedasticity modelling on daily data from January 2, 2002, to August 11, 2011. The results showed that there is no long-run relationship between stock prices and exchange rate in Nigeria, albeit, with a structural break date of mid-April 2007, which coincides with the period when the stock prices plumped precipitously from the impact of the global financial crisis in early 2007. In addition, the results indicated that there is a unidirectional relationship from stock prices to exchange rate and that the EGARCH modelling suggested that a 100% increase in stock prices would lead to a 1.66% appreciation of the exchange rate. Thus, it is imperative for monetary authorities in Nigeria to take into account the role of stock market development in the conduct of its exchange rate policy.

Keywords: Stock price, Stock market, Exchange rate, Structural break cointegration, and Exponential GARCH modeling

JEL Classification: C13, F31, G12

Suggested Citation

Omisakin, Olusegun A. and Omisakin, Olusegun A. and Oyinlola, Mutiu Abimbola and Adeniyi, Oluwatosin, The Dynamics of Stock Prices and Exchange Rates: Evidence From Nigeria (November 27, 2012). West African Journal of Monetary and Economic Integration, 2012, Available at SSRN: https://ssrn.com/abstract=3494308

Olusegun A. Omisakin (Contact Author)

The Nigerian Economic Summit Group (NESG) ( email )

The Summit House,
6, Oba Elegunshi Street
Ikoyi, Lagos, 234
Nigeria

HOME PAGE: http://www.olusegunomisakin.com

Independent ( email )

Mutiu Abimbola Oyinlola

University of Ibadan - Department of Economics ( email )

Department of Economics
Ibadan, OK Oyo State 900001
Nigeria

Oluwatosin Adeniyi

University of Ibadan - Faculty of Public Health ( email )

University of Ibadan
Ibadan, OR Oyo Stase 10001
Nigeria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
195
PlumX Metrics