Bayesian Linear Regression Model

BAYESIAN LINEAR REGRESSION MODEL: ANALYSIS OF THE FINANCIAL ACTIVITIES OF THE BANKING SECTOR OF THE NIGERIA STOCK EXCHANGE. AN ASSIGNMENT PROPOSER SUBMITTED BY

OGUNSHOLA STEPHEN ADESHINA (081004105) (Mathematics Department, University of Lagos) SUBMITTED TO DR M. ADAMU-IRIA STATISTICAL PACKAGES MAT 829 MAY 2015

INTRODUCTION

Bayesian statistics is an approach to statistics which formally seeks use of prior information with the data. Bayes‟ Theorem provides the formal basis for making use of both sources of information in a formal manner. The Bayesian analysis is the study of different features of posterior density. In this assignment, Bayesian Regression analysis using R software (with MCMC pack) will use to explore data extracted from the Nigeria Stock Exchange in the Capital market (case study of two banks; Access Bank PLC and United Bank of Africa PLC). Data collected for this project shall be a secondary data from Nigeria stock Exchange; All-share Index, daily price of stock, interest rate, exchange rate and daily oil price for the period of five years 2005-2009. For this purpose, we shall define the response variable as the Nigeria Stock Exchange All-share Index (NSEAI). The covariates will be the Daily price of stock, Interest rate (Lending rate), Exchange rate and Oil price. Simulation approach of Bayesian analysis shall be employed in this study.