International Oil Price and Sectoral Stock Prices : An Asymmetric Kernel and Nonlinear Autoregressive Distributed Lag Analysis

In this work, we test the price sensitivity of sector indices to changes in the oil price over the period 2001 to 2021 using the kernel method and the non-linear autoregressive method with distributed lags (NARDL) proposed by Shin et al., (2014). We capture both short-term and long-term non-linearities, through positive and negative partial sum decompositions of the explanatory variables and show a non-linear relationship between the prices of oil and sector indices. Furthermore, the results show that fluctuations in oil prices do not have a statistically significant impact on West African sectoral stock prices except for the financial and agricultural sectors. Finally, we observe only a short-term asymmetry and a cointegrating relationship between the price of oil and the agricultural sector. These results are robust and further enrich the decision support tools for financial market players in their investment strategy