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Modelling the Impact of the COVID-19 Pandemic on Some Nigerian Sectorial Stocks: Evidence from GARCH Models with Structural Breaks

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  • Monday Osagie Adenomon

    (Department of Statistics, Nasarawa State University, PMB 1022, Keffi 911019, Nigeria
    NSUK-LISA Stat Lab, Nasarawa State University, PMB 1022, Keffi 911019, Nigeria
    International Association of Statistical Computing (IASC) African Members Group, Keffi 961101, Nigeria
    Foundation of Laboratory for Econometrics and Applied Statistics of Nigeria (FOUND-LEAS-IN-NIGERIA), Bida 912101, Nigeria)

  • Richard Adekola Idowu

    (Mathematics Department, Prairie View A&M University, Prairie View, TX 77446, USA)

Abstract

This study provides evidence of the impact of COVID-19 on five (5) Nigerian Stock Exchange (NSE) sectorial stocks (NSE Insurance, NSE Banking, NSE Oil and Gas, NSE Food and Beverages, and NSE Consumer Goods). To achieve the goal of this paper, daily stock prices were obtained from a secondary source ranging from 2 January 2020 to 25 March 2021. Because of the importance of incorporating structural breaks in modelling stock returns, the Zivot–Andrews unit root test revealed 20 January 2021, 26 March 2020, 27 July 2020, 23 March 2020 and 23 March 2020 as potential break points for NSE Insurance, NSE Food, Beverages and Tobacco, NSE Oil and Gas, NSE Banking, and NSE Consumer Goods, respectively. This study investigates the volatility in daily stock returns for the five (5) Nigerian Stock Exchange (NSE) sectorial stocks using nine versions of GARCH models (sGARCH, girGARCH, eGARCH, iGARCH, aPARCH, TGARCH, NGARCH, NAGARCH, and AVGARCH); in addition, the half-life and persistence values were obtained. The study used the Student t - and skewed Student t -distributions. The results from the GARCH models revealed a negative impact of COVID-19 on the NSE Insurance, NSE Food, Beverages and Tobacco, NSE Banking, and NSE Consumer Goods stock returns; however, the NSE Oil and Gas returns showed a positive correlation with the COVID-19 pandemic. This study recommends that the shareholders, investors, and policy players in the Nigerian Stock Exchange markets should be adequately prepared in the form of diversification of investment in stocks that can withstand future possible crises in the market.

Suggested Citation

  • Monday Osagie Adenomon & Richard Adekola Idowu, 2022. "Modelling the Impact of the COVID-19 Pandemic on Some Nigerian Sectorial Stocks: Evidence from GARCH Models with Structural Breaks," FinTech, MDPI, vol. 2(1), pages 1-20, December.
    • Handle: RePEc:gam:jfinte:v:2:y:2022:i:1:p:1-20:d:1010109
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    References listed on IDEAS

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