Crude oil market and Nigerian stocks: An asymmetric information spillover approach

Abstract This article examines the nature of information spillovers, in return and volatility, that exists between the full index stock of the Nigerian stock exchange (NSE) and the crude oil markets (Brent and West Texas Intermediate (WTI) oil markets). We adopted the asymmetric VAR − MGARCH − GJR − BEKK model and found evidence of unidirectional return spillover from the Brent oil market to the NSE and a bidirectional return spillover between the NSE market and the WTI oil market. The response of the WTI market to a shock on the NSE market is rather short‐lived. There exists strong evidence of a lead–lag relationship between the crude oil market and the NSE market wherein the crude oil market leads or drives the NSE market return fluctuations. For both crude oil markets, the Brent and the WTI markets, there exists a bidirectional volatility spillover between the NSE index and the crude oil markets, as well as significant asymmetric shocks. Practical policy implications and recommendations were made, based on the findings.