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Portfolio Balance Approach To Asymmetries, Structural Breaks And Financial Crisis: Testing A Model For Nigeria, Portfolio Balance Theory, Oluwasegun B. Adekoya
Portfolio Balance Approach To Asymmetries, Structural Breaks And Financial Crisis: Testing A Model For Nigeria, Portfolio Balance Theory, Oluwasegun B. Adekoya
CBN Journal of Applied Statistics (JAS)
This study tests the Portfolio Balance Theory (PBT) for Nigeria for the period starting from September 1997 to September 2018. It extends the hypothesized linear inverse relationship between exchange rate and stock price to include asymmetries and structural breaks. It further examines the impact of the 2008 global financial crisis on the PBT to determine its stability after the crisis. The full sample results show that the PBT holds for Nigeria and asymmetries and structural breaks matter in the nexus between stock price and exchange rate. However, the impact of stock price on exchange rate diminished in the long-run with …