Effects of oil price shock on stock returns of energy firms in Nigeria

Authors

  • Kenny Adedapo Soyemi Department of Accounting and Banking & Finance, Olabisi Onabanjo University, Ago-Iwoye, Nigeria
  • Richard Ore-Oluwa Akingunola Department of Accounting and Banking & Finance, Olabisi Onabanjo University, Ago-Iwoye, Nigeria
  • Joseph Ogebe Department of Economics, University of Ibadan, Ibadan, Nigeria

Keywords:

CAPM, market returns, oil shocks, oil returns, stock returns

Abstract

     The destabilizing effects of oil price shocks on economies cannot be underestimated. Recent trends in the literature have hypothesized its direct and indirect effects on the economy, especially the financial markets. This paper examined the impact of the direct and indirect effects of oil price shocks on quoted energy-related stocks in Nigeria. While the direct effect of oil price shocks was captured with the Capital Asset Pricing Model (CAPM), the indirect impact was derived logically from an extant hypothesis which posits that the effect of oil price shocks will indirectly transmit through the stock market to affect company stocks. The sample for this study comprised seven blue chip, energy related firms listed on the Nigerian Stock Exchange (NSE), involving data collected between 2007 and 2014. The three stages least squares (3SLS) method was used to analyze the interrela­ tionship between oil shocks and stock returns. The results showed that oil shocks have a direct positive effect on company stock returns. In addition, an indirect relationship exists between oil shocks and company stock returns, which is transmitted through market returns.

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Published

30-12-2017

How to Cite

Soyemi, K. A., Akingunola, R. O.-O., & Ogebe, J. (2017). Effects of oil price shock on stock returns of energy firms in Nigeria. Kasetsart Journal of Social Sciences, 40(1), 24–31. Retrieved from https://so04.tci-thaijo.org/index.php/kjss/article/view/235257

Issue

Section

Research articles