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<p>This paper examines the impacts of global economic policy uncertainty (GEPU) and Geopolitical risk (GPR) on stock market returns in Nigeria for the period from 2006:1 to 2020:12. Adopting a two-stage Markov switching model, this study found new information, like GEPU affects stock market returns in Nigeria negatively in the low-volatility regime and positively impacts stock returns in the high-volatility regime. Thus, GEPU has a more significant and beneficial influence on stock returns in a high-volatility environment. Contrary to expectations, another finding demonstrates that stock returns in Nigeria under both low- and high-volatility regimes were not significantly impacted by geopolitical risk. Hence, the effects of GEPU and GPR in the Nigerian stock market are heterogeneous in the two regime states considered in the Markov switching estimation. Therefore, using the behaviour of these two variables (i.e., GEPU and GPR) to predict the stock market returns or direction in Nigeria may not be robust or yield a significant outcome.</p>

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Global economic policy uncertainty, geopolitical risk and stock returns in Nigeria

  • 期刊论文

  • 发表日期：

    2025年11月21日

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  • Ndubuisi O. Chukwu,
  • Ambrose Nnaemeka Omeje

摘要

This paper examines the impacts of global economic policy uncertainty (GEPU) and Geopolitical risk (GPR) on stock market returns in Nigeria for the period from 2006:1 to 2020:12. Adopting a two-stage Markov switching model, this study found new information, like GEPU affects stock market returns in Nigeria negatively in the low-volatility regime and positively impacts stock returns in the high-volatility regime. Thus, GEPU has a more significant and beneficial influence on stock returns in a high-volatility environment. Contrary to expectations, another finding demonstrates that stock returns in Nigeria under both low- and high-volatility regimes were not significantly impacted by geopolitical risk. Hence, the effects of GEPU and GPR in the Nigerian stock market are heterogeneous in the two regime states considered in the Markov switching estimation. Therefore, using the behaviour of these two variables (i.e., GEPU and GPR) to predict the stock market returns or direction in Nigeria may not be robust or yield a significant outcome.