Network Granger Causality Linkages in Nigeria and Developed Stock Markets: Bayesian Graphical Analysis

Oluseun Olayungbo D. Al-Faryan M.A.S. Zhuparova A.
2024 Routledge

Journal of African Business
2024 #25 Issue 3 555 - 579 pp.

This study investigates the interdependent structure between Nigeria and developed stock market using directed acyclic graph with Bayesian estimation techniques for the period of March 11, 2020 to July 31, 2021. The dynamic Granger causal test of both the contemporaneous and autoregressive estimation were done using the Markov Chain Monte Carlo (MCMC) simulation method with Metropolis-Hasting (MH) sampling technique. The graphical structure of the instantaneous and autoregressive results shows returns correlation for Nigeria’s stock market and both China and India’s stock market while absence of return correlation are found for both US and UK stock market. The result implies that Nigeria’s stock market has potential diversification benefit for the US and UK investors during pandemic crises. In addition, US stock market returns is found to depend on China stock market returns while volatility spill over runs from the US stock market to China’s stock market. Last, UK stock market tends to depend on India’s stock market. The implication of the study is that Nigeria’s stock market is integrated with China and India’s stock market while China’s stock market is linked to the US stock market such that any financial shock from the lead stock markets is transmitted to the lagged stock markets.

Bayesian graphical network , COVID-19 , Developed market , Nigeria , Returns , Spillover

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Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria
School of Accounting, Economics and Finance, Faculty of Business and Law, University of Portsmouth, United Kingdom
Consultant in Economics and Finance, Riyadh, Saudi Arabia
Higher School of Economics and Business, Al-Farabi Kazakh National University Almaty, Kazakhstan

Department of Economics
School of Accounting
Consultant in Economics and Finance
Higher School of Economics and Business

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