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Modeling the spillovers between stock market and money market in Nigeria

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  • Afees A. Salisu

    () (Centre for Econometric and Allied Research, University of Ibadan)

  • Kazeem Isah

    () (Centre for Econometric and Allied Research, University of Ibadan)

Abstract

This study examines the spillovers between stock market and money market in Nigeria over the period January 2000 to July 2015. Based on relevant pre-tests, the VARMA-CCC-GARCH is selected and consequently employed to model the spillovers. The study finds significant cross-market return and shock spillovers between the two markets. Thus, a shock to one market is more likely to spill over to the other market. It is also observed that shocks have persistent effects on stock market volatility but transitory effects on money market volatility. In other words, shocks to the money market die out over time while shocks to stock market tend to persist over time. In addition, including lagged own shocks and lagged own conditional variance when forecasting the future volatility of both return series may enhance their forecast performance.

Suggested Citation

  • Afees A. Salisu & Kazeem Isah, 2017. "Modeling the spillovers between stock market and money market in Nigeria," Working Papers 023, Centre for Econometric and Allied Research, University of Ibadan.
  • Handle: RePEc:cui:wpaper:0023
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    Keywords

    Return Spillover; Shock Spillover; Shork Persistence; VARMA-CCC-GARCH;

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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