Forecasting the Nigerian stock exchange insurance index using ARIMA modelling

Abstract

The insurance industry is important to the expansion and stabilization of economies in emerging markets. Stakeholders including investors insurance companies and legislators can anticipate market movements maximize investments and develop successful strategies based on accurate projections by comprehending and forecasting the Insurance Index. Especially in the insurance industry precise forecasts help with risk management resource allocation and profitability. This study fills a gap in the literature regarding insurance-specific forecasts within Nigeria’s financial landscape by examining the Nigerian Insurance Index in particular in contrast to earlier research that frequently concentrates on individual stocks or more general indices like the NSE All-Share Index. To forecast the Nigerian Insurance Index the study finds and validates the best model using the Box-Jenkins ARIMA methodology. Using training data from December 20 2009 to December 25 2022 and testing data from January 1 2023 to March 19 2023 the ARIMA model—which is renowned for identifying short-term time series patterns—is applied to weekly stock prices. After a thorough diagnostic and assessment procedure ARIMA (017) is determined to be the best-fit model offering precise and timely forecasts that are essential for negotiating the intricacies of the Nigerian insurance market. For stakeholders the research offers significant value in the form of accurate predictive insights that help them make data-driven decisions create risk-averse strategies and promote long-term growth in Nigeria’s insurance sector.