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Foreign Exchange News Announcements and the Volatility of Stock Returns in Nigeria

Author

Listed:
  • Joshua Odutola Omokehinde

    (Department of Accounting and Banking & Finance, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Nigeria)

  • Matthew Adeolu Abata

    (Graduate School of Business and Leadership, University of KwaZulu-Natal, Westville Campus, Durban, South Africa)

  • Stephen Oseko Migiro

    (Graduate School of Business and Leadership, University of KwaZulu-Natal, Westville Campus, Durban, South Africa)

Abstract

This paper examines the effect of foreign exchange news announcements on the volatility of stock returns in Nigeria, using the daily closing All-Share Index from The Nigerian Stock Exchange from 2000 to 2015. We extended existing literature by augmenting the EGARCH econometric model with exchange news announcements to specify both the conditional mean and volatility equations. The empirical results revealed a positive and significant effect of exchange news announcements on stock market volatility in Nigeria under symmetric conditional variance. However, there was strong evidence of asymmetric effect with negative exchange news which caused volatility to rise more following a large price rise than following a price fall of the same magnitude. The total impact of bad news had more distabilising effect on volatility than good news. The sum of ARCH and GARCH coefficients (á + â = 0.9) is approximately close to unity – indicating strong evidence of volatility persistence in the Nigerian stock market.

Suggested Citation

  • Joshua Odutola Omokehinde & Matthew Adeolu Abata & Stephen Oseko Migiro, 2017. "Foreign Exchange News Announcements and the Volatility of Stock Returns in Nigeria," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 67(3), pages 3-17, july-Sept.
    • Handle: RePEc:spd:journl:v:67:y:2017:i:3:p:3-17
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    References listed on IDEAS

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    Cited by:

    1. Musa Ilias Biala & A.K. Oladejo, 2022. "On the Nexus between Exchange Rate and Stock Price in Nigeria," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 12(1), pages 80-99.

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    More about this item

    Keywords

    Volatility; stock returns; exchange news; asymmetric; volatility persistence.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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