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Simeon Ebechidi and Eleanya K. Nduka
''Modeling the Impact of Oil Price Shocks on Energy Sector Stock Returns: Evidence from Nigeria''
( 2017, Vol. 37 No.4 )
This study examines the effect of oil price shocks on energy stock returns in Nigeria for the period from January, 2000 to December, 2015. The study employs the Augmented Dickey-Fuller (ADF) and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) tests for Unit root and a General Autoregressive Conditional Heteroscedasticity (GARCH 1, 1) modeling approach. The mean equation reveals that if oil price increases by one percent, energy sector stock returns will decrease by 74%. If exchange rate increases by $1, energy sector stock returns increases by about 0.78%. Furthermore, a unit increase in interest rate differential will cause a decrease in energy sector stock returns by about 25%. On the other hand, results of the variance equation, which captures volatility, suggest that oil price shocks and energy stock returns are negatively related.
Keywords: Volatility, Stock, Oil, Returns, Heteroscedasticity, GARCH
JEL: Q4 - Energy: General
C5 - Econometric Modeling: General
Manuscript Received : Jul 03 2017 Manuscript Accepted : Nov 19 2017

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