Return-Volatility Interactions in the Nigerian Stock Market
The study employed the GARCH (1, 1) and VAR models to ascertain the relationship between volatilities in the monetary policy variables and volatilities in the stock market returns in Nigeria between 1980 and 2010.The study showed that only exchange rate policy variable have an influence on the stock market volatility with a negative coefficient but statistically significant indicating that higher volatility in the exchange rate dampens stock market activities. This means that an increase in exchange volatility will lead to a fall in stock market volatility. Additionally, result showed that M1granger causes very significantly M2 and vice versa. Implicitly, it shows that there is “bi-directional causality” or a “bi-directional feedback” between M1 andM2.What this implies is that stabilizing interest rate will reduce the volatility in the stock market. The study also observed that there is no effect of international factor and influence on the stock market returns implying that international volatilities is not transmitted across national stock markets in Nigeria. Finally, there is the presence of volatility shocks. The study therefore suggested that government policy should focus on exchange rate to stabilize the stock market. Investors are also advised to consider the nature of volatility in exchange rate before making investment decisions.
Volume (Year): 2 (2012)
Issue (Month): 2 (June)
|Contact details of provider:|| Postal: |
Web page: http://www.aessweb.com/
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thorbecke, Willem, 1997.
" On Stock Market Returns and Monetary Policy,"
Journal of Finance,
American Finance Association, vol. 52(2), pages 635-54, June.
- James M. Poterba & Lawrence H. Summers, 1984.
"The Persistence of Volatility and Stock Market Fluctuations,"
NBER Working Papers
1462, National Bureau of Economic Research, Inc.
- Poterba, James M & Summers, Lawrence H, 1986. "The Persistence of Volatility and Stock Market Fluctuations," American Economic Review, American Economic Association, vol. 76(5), pages 1142-51, December.
- James M. Poterba & Lawrence H. Summers, 1984. "The Persistence of Volatility and Stock Market Fluctuations," Working papers 353, Massachusetts Institute of Technology (MIT), Department of Economics.
- Officer, R R, 1973. "The Variability of the Market Factor of the New York Stock Exchange," The Journal of Business, University of Chicago Press, vol. 46(3), pages 434-53, July.
- Eva Liljeblom & Marianne Stenius, 1997. "Macroeconomic volatility and stock market volatility: empirical evidence on Finnish data," Applied Financial Economics, Taylor & Francis Journals, vol. 7(4), pages 419-426.
- Mansor H. Ibrahim and Wan Sulaiman Wan Yusoff, 2001. "Macroeconomic Variables, Exchange Rate And Stock Price: A Malaysian Perspective," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 9(2), pages 141-164, December.
When requesting a correction, please mention this item's handle: RePEc:asi:aeafrj:2012:p:389-399. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qazi Muhammad Imran)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.