Regime-Switching Dynamics of Nigerian Group Exchange Cement Equities: A Continuous-Time Markov Chain Analysis

We model daily price dynamics of BUA Cement and BZU Cement on the Nigerian Group Exchange (NGX) as three-state Continuous-Time Markov Chains (CTMCs) representing Low, Mid, and High regimes. Using nine months of data, estimated generator matrices show that BZU exhibits 2.4 times higher total transition intensity than BUA, with expected holding times of 1.5 months versus 3.0 months in bear states. Stationary distributions reveal that BUA spends 30% of time in the absorbing bull state, while BZU is uniformly distributed across regimes, indicating higher mean reversion. The CTMC results highlight BUA's relative stability compared with BZU's higher regime volatility. One-month transition forecasts show that BUA remains in the High regime with probability 100%, whereas BZU has only 51.3% probability of remaining High and a 28.3% chance of dropping directly to Low. These findings indicate that BUA is trend-persistent, while BZU is regime-unstable and more exposed to short-term downside switching risk.