Does inflation have an impact on stock returns and volatility? Evidence from Nigeria and Ghana
This study seeks to apply the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model to assess the impact of inflation on stock market returns and volatility using monthly time series data from two West African countries, that is, Nigeria and Ghana. In addition, the impact of asymmetric shocks was investigated using the quadratic GARCH model developed by Sentana (1995), in both countries. Results for Nigeria show weak support for the hypothesis which states that bad news exert more adverse effect on stock market volatility than good news of the same magnitude; while a strong opposite case holds for Ghana. Furthermore, inflation rate and its 3-month average were found to have significant effect on stock market volatility in the two countries. Measures employed towards restraining inflation in the two countries, therefore, would certainly reduce stock market volatility, improve stock market returns and boost investor confidence.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 22 (2012)
Issue (Month): 6 (March)
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|
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.:
- Roberto Rigobon & Brian P. Sack, 2002.
"The Impact of Monetary Policy on Asset Prices,"
NBER Working Papers
8794, National Bureau of Economic Research, Inc.
- Nicole Davis & Ali Kutan, 2003. "Inflation and output as predictors of stock returns and volatility: international evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 13(9), pages 693-700.
- Engle III, Robert F., 2003.
"Risk and Volatility: Econometric Models and Financial Practice,"
Nobel Prize in Economics documents
2003-4, Nobel Prize Committee.
- Robert Engle, 2004. "Risk and Volatility: Econometric Models and Financial Practice," American Economic Review, American Economic Association, vol. 94(3), pages 405-420, June.
- Kaul, Gautam, 1987. "Stock returns and inflation : The role of the monetary sector," Journal of Financial Economics, Elsevier, vol. 18(2), pages 253-276, June.
- Robert F. Engle & Victor K. Ng, 1991.
"Measuring and Testing the Impact of News on Volatility,"
NBER Working Papers
3681, National Bureau of Economic Research, Inc.
- Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-1778, December.
- Robert F. Engle & Jose Gonzalo Rangel, 2005. "The Spline GARCH Model for Unconditional Volatility and its Global Macroeconomic Causes," Working Papers 2005/13, Czech National Bank, Research Department.
- Sentana,E., 1995.
"Quadratic Arch Models,"
9517, Centro de Estudios Monetarios Y Financieros-.
- Schwert, G William, 1989.
" Why Does Stock Market Volatility Change over Time?,"
Journal of Finance,
American Finance Association, vol. 44(5), pages 1115-1153, December.
- G. William Schwert, 1988. "Why Does Stock Market Volatility Change Over Time?," NBER Working Papers 2798, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:22:y:2012:i:6:p:427-435. 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: (Michael McNulty)
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.