Dynamic links between the Nigerian equity market and those of selected regional and developed countries

Abstract

The dynamic and growing interdependent nature of equity markets across the world has elicited the interest of investors and researchers alike. This study examines the dynamic interactions between the Nigerian stock market and selected regional and global equity markets spanning eight years, from 2011 to 2018, using daily index data. The generalised impulse response function was used alongside the Toda and Yamamoto Granger causality test to investigate the short-run dynamic linkages, while the normalized Johansen vector error correction estimates served to assess the long-run linkages given the existence of cointegration. Findings from the study revealed that the UK and the Ghanaian stock markets exert significant long-run impact on the Nigerian stock market, while vagaries from the US tend to exert more influence on the Nigerian stock market in the short-run. The study recommends that more regional efforts are needed to enhance the integration of stock markets in West Africa. The findings have implications for national and regional policymakers as well as portfolio investors.