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Modelling Stock Returns Volatility In Nigeria Using GARCH Models

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  • Emenike, Kalu O.

Abstract

There is quite an extensive literature documenting the behaviour of stock returns volatility in both developed and emerging stock markets, but such studies are scanty for the Nigerian Stock Exchange (NSE). Modelling volatility is an important element in pricing equity, risk management and portfolio management. For these reasons, this paper investigates the behaviour of stock return volatility of the Nigerian Stock Exchange returns using GARCH (1,1) and the GJR-GARCH(1,1) models assuming the Generalized Error Distribution (GED). Monthly All Share Indices of the NSE from January 1999, to December 2008, provided the empirical sample for investigating volatility persistence and asymmetric properties of the series. The results of GARCH (1,1) model indicate evidence of volatility clustering in the NSE return series. Also, the results of the GJR-GARCH (1,1) model show the existence of leverage effects in the series. Finally, the Generalized Error Distribution (GED) shape test reveals leptokurtic returns distribution. Overall results from this study provide evidence to show volatility persistence, fat-tail distribution, and leverage effects for the Nigeria stock returns data.

Suggested Citation

  • Emenike, Kalu O., 2010. "Modelling Stock Returns Volatility In Nigeria Using GARCH Models," MPRA Paper 22723, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22723
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    File URL: https://mpra.ub.uni-muenchen.de/23432/1/MPRA_paper_23432.pdf
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    References listed on IDEAS

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    Cited by:

    1. repec:eco:journ1:2018-02-38 is not listed on IDEAS
    2. Yaya, OlaOluwa S. & Gil-Alana, Luis A., 2014. "The persistence and asymmetric volatility in the Nigerian stock bull and bear markets," Economic Modelling, Elsevier, vol. 38(C), pages 463-469.

    More about this item

    Keywords

    Modeling; Volatility; Stock Returns; GARCH Models; Nigerian Stock Exchange;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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