Re-examining the Effect of Volatility Persistence on Nigerian Stock Market Returns: Mean-Revert Garch Approach
Keywords:
Revert in Mean-GARCH Model; Stock Return; Volatility Persistence; Nigerian Capital MarketAbstract
The investment decision in the Nigerian stock is based on the level of volatility of the market. However, the volatility persistence of stock returns in the Nigerian market has negatively affects the participation of investors in the market. This study re-examined the effect of persistent volatility on the prices of the stocks in the Nigerian market between 2008 and 2018. With the use of ARCH and GARCH estimations, the study revealed three distributional assumptions with the co-efficients as (0.897, 0.939 and 0.956) revealing that the returns exhibit high volatility persistence at different selection criterion models. It concludes therefore, that the Nigerian stock market exhibits high volatility persistence. Hence, the study recommends that the regulators in the Nigerian stock market should model the regulatory framework guiding the operations in line with emerging markets with less volatile stock returns.
References
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Atoi, N. V. (2014). Testing volatility in Nigeria stock market using GARCH Models. CBN Journal of Applied Statistic, 5(2), 65-93.
Ariwa, F .O., Ani, O. I., Onyele, K. O., Ekeleme, I. J., & Okwuchukwu, O. (2017). Impact of stock market liquidity and efficiency on performance of the manufacturing sector in Nigeria (1985-2014). International Journal of Economics and Financial Management, 2(1), 71-82.
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Balagobei, S. (2017). Macroeconomic variables and stock market returns in Sri Lanka. Asian Journal of Finance & Accounting, 9(2), 206-218.
Bala-Sani, A. R., & Hassan, A. (2018). Exchange rate and stock market interactions: evidence from Nigeria. Arabian J Bus Manag Review, 8(2), 334-356.
Bala, D. A., & Asemota, J. O. (2013). Exchange rates volatility in Nigeria: Application of GARCH models with exogenous break. CBN Journal of Applied Statistics, 4(1), pp.89-116.
Bollerslev, T. (1986). Generalised autoregressive conditional heteroskedasticity. Journal of Econometrics, 31, 307-327
Dikko, H. G., Asiribo, O. E., & Samson, A. (2015). Modelling abrupt shift in time series using indicator variable: Evidence of Nigerian insurance stock. International Journal of Finance and Accounting, 4(2), 119-130.
Engle, R. F. (1982). Autoregressive conditional heteroskedasticitywith estimates of the variance of United Kingdom Inflation. Econometrica, 50, 987-1007.
Fasanya, I. O., & Adekoya, O. B. (2017). Modelling inflation rate volatility in Nigeria with structural breaks. CBN Journal of Applied Statistics, 8(1), 175-193.
Ghufran, B., Awan, H. M., Khakwani, A. K., & Qureshi, M. A. (2016). What causes stock market volatility in Pakistan? Evidence from the field. Economics Research International, 7(4), 1-9.
Goudarzi, H., &Ramanarayanan, C. (2011). Modeling asymmetric volatility in the Indian stock market. International Journal of Business and Management, 6(3), 221-231.
Ho, J. C., & Hung, C. H. (2012). Predicting stock market returns and volatility with investor sentiment: Evidence from eight developed countries. Journal of Accounting and Finance, 12(4), 49–66.
Hojatallah, G., & Ramanarayanan, C. S. (2011). Modeling asymmetric volatility in the Indian stock market. International Journal of Business and Management, 6(3), 12-25.
Jensen, M. C. (1978). Some anomalous evidence regarding market efficiency. Journal of Financial Economics, 6(2/3), 95-101.
Kganyago, T., & Gumbo, V. (2015). An empirical study of the relationship between money market interest rates and stock market performance: Evidence from Zimbabwe (2009-2013). International Journal of Economics and Financial Issues,5(3), 638-646.
Kuhe, D. A. (2018). Modeling volatility persistence and asymmetry with exogenous breaks in the Nigerian Stock returns. CBN Journal of Applied Statistics, 9( 1), 167-196.
Kuhe, D. A., & Chiawa, M. A. (2017). Modelling volatility of asset returns in Nigerian stock market: Applications of random level shifts models. Asian Research Journal of Mathematics, 7(4), 1-14.
Ndwiga, D., & Muriu, P. W. (2016). Stock returns and volatility in an emerging equity market. Evidence from Kenya. European Scientific Journal, 12(4), 79-98.
Nyong, M. O. (2005). Predictability and volatility of stock returns in three emerging markets: Nigeria. Journal of Economics and Development Matters, 2(1), 12-29.
Onoh, J. O., Ukeje, O. S., & Nkama, N. O. (2017). Trading volume and market turnover in the Nigerian capital market: Implications to stock market returns. IIARD International Journal of Economics and Business Management, 3(1), 91-107.
Onoh, J. O, Ibekwe, F. C., Uloma, A. O., & Egbo, B. O. (2016). Measuring daily stock market returns using market capitalization ratio in Nigeria. Journal of Management and Social Sciences, 4(2), 188-203.
Otieno, D. A. (2017). Macroeconomic determinants of stock market returns in Kenya: 1993-2015. A Thesis Submitted in Partial Fulfillment for the Degree of Doctor of Philosophy in Economics in the University of Nairobi.
Onwukwe, C. E., Bassey, B. E. E., & Isaac, I. O. (2011). On modeling the volatility of Nigerian stock returns using GARCH models. Journal of Mathematics Research, 3(4), 31-43.
Owidi, O. H., & Mugo-Waweru, F. (2016). Analysis of asymmetric and persistence in stock return volatility in the Nairobi securities exchange market phases. Journal of Finance and Economics, 4(3), 63-73.
Oyinlola, M. A. (2018). Modelling volatility persistence and asymmetry of naira-dollar exchange rate. CBN Journal of Applied Statistics, 9( 1), 141-165.
Samuelson, P. (1965). Proof that properly anticipated prices fluctuate randomly. Industrial Management Review, 6, 41-49
Taylor, S. (1986). Modelling financial time series, Wiley: Chichester
Uyaebo, S. O., Atoi, V. N., & Usman, F. (2015). Nigeria stock market volatility in comparison with some countries. Application of asymmetric GARCH models. CBN Journal of Applied Statistics, 6(2), 133 – 160.
Uzuke, C. A., Obiora-Ilouno, H. O., & Eze F. C. (2016). Time series analysis of all shares index of Nigerian stock exchange: A box-jenkins approach. International Journal of Science, 5(6), 1-23.
Tripathy, T., & Gil-Alana, L. A. (2010). Suitability of volatility models for forecasting stock market returns. A study on the Indian national stock exchange. American Journal of Applied Sciences, 7(11), 1487-1494.
Atoi, N. V. (2014). Testing volatility in Nigeria stock market using GARCH Models. CBN Journal of Applied Statistic, 5(2), 65-93.
Ariwa, F .O., Ani, O. I., Onyele, K. O., Ekeleme, I. J., & Okwuchukwu, O. (2017). Impact of stock market liquidity and efficiency on performance of the manufacturing sector in Nigeria (1985-2014). International Journal of Economics and Financial Management, 2(1), 71-82.
Bachelier, L. (1900). Trans. james boness. Theory of speculation, in Cootner (1964), 17-78.
Balagobei, S. (2017). Macroeconomic variables and stock market returns in Sri Lanka. Asian Journal of Finance & Accounting, 9(2), 206-218.
Bala-Sani, A. R., & Hassan, A. (2018). Exchange rate and stock market interactions: evidence from Nigeria. Arabian J Bus Manag Review, 8(2), 334-356.
Bala, D. A., & Asemota, J. O. (2013). Exchange rates volatility in Nigeria: Application of GARCH models with exogenous break. CBN Journal of Applied Statistics, 4(1), pp.89-116.
Bollerslev, T. (1986). Generalised autoregressive conditional heteroskedasticity. Journal of Econometrics, 31, 307-327
Dikko, H. G., Asiribo, O. E., & Samson, A. (2015). Modelling abrupt shift in time series using indicator variable: Evidence of Nigerian insurance stock. International Journal of Finance and Accounting, 4(2), 119-130.
Engle, R. F. (1982). Autoregressive conditional heteroskedasticitywith estimates of the variance of United Kingdom Inflation. Econometrica, 50, 987-1007.
Fasanya, I. O., & Adekoya, O. B. (2017). Modelling inflation rate volatility in Nigeria with structural breaks. CBN Journal of Applied Statistics, 8(1), 175-193.
Ghufran, B., Awan, H. M., Khakwani, A. K., & Qureshi, M. A. (2016). What causes stock market volatility in Pakistan? Evidence from the field. Economics Research International, 7(4), 1-9.
Goudarzi, H., &Ramanarayanan, C. (2011). Modeling asymmetric volatility in the Indian stock market. International Journal of Business and Management, 6(3), 221-231.
Ho, J. C., & Hung, C. H. (2012). Predicting stock market returns and volatility with investor sentiment: Evidence from eight developed countries. Journal of Accounting and Finance, 12(4), 49–66.
Hojatallah, G., & Ramanarayanan, C. S. (2011). Modeling asymmetric volatility in the Indian stock market. International Journal of Business and Management, 6(3), 12-25.
Jensen, M. C. (1978). Some anomalous evidence regarding market efficiency. Journal of Financial Economics, 6(2/3), 95-101.
Kganyago, T., & Gumbo, V. (2015). An empirical study of the relationship between money market interest rates and stock market performance: Evidence from Zimbabwe (2009-2013). International Journal of Economics and Financial Issues,5(3), 638-646.
Kuhe, D. A. (2018). Modeling volatility persistence and asymmetry with exogenous breaks in the Nigerian Stock returns. CBN Journal of Applied Statistics, 9( 1), 167-196.
Kuhe, D. A., & Chiawa, M. A. (2017). Modelling volatility of asset returns in Nigerian stock market: Applications of random level shifts models. Asian Research Journal of Mathematics, 7(4), 1-14.
Ndwiga, D., & Muriu, P. W. (2016). Stock returns and volatility in an emerging equity market. Evidence from Kenya. European Scientific Journal, 12(4), 79-98.
Nyong, M. O. (2005). Predictability and volatility of stock returns in three emerging markets: Nigeria. Journal of Economics and Development Matters, 2(1), 12-29.
Onoh, J. O., Ukeje, O. S., & Nkama, N. O. (2017). Trading volume and market turnover in the Nigerian capital market: Implications to stock market returns. IIARD International Journal of Economics and Business Management, 3(1), 91-107.
Onoh, J. O, Ibekwe, F. C., Uloma, A. O., & Egbo, B. O. (2016). Measuring daily stock market returns using market capitalization ratio in Nigeria. Journal of Management and Social Sciences, 4(2), 188-203.
Otieno, D. A. (2017). Macroeconomic determinants of stock market returns in Kenya: 1993-2015. A Thesis Submitted in Partial Fulfillment for the Degree of Doctor of Philosophy in Economics in the University of Nairobi.
Onwukwe, C. E., Bassey, B. E. E., & Isaac, I. O. (2011). On modeling the volatility of Nigerian stock returns using GARCH models. Journal of Mathematics Research, 3(4), 31-43.
Owidi, O. H., & Mugo-Waweru, F. (2016). Analysis of asymmetric and persistence in stock return volatility in the Nairobi securities exchange market phases. Journal of Finance and Economics, 4(3), 63-73.
Oyinlola, M. A. (2018). Modelling volatility persistence and asymmetry of naira-dollar exchange rate. CBN Journal of Applied Statistics, 9( 1), 141-165.
Samuelson, P. (1965). Proof that properly anticipated prices fluctuate randomly. Industrial Management Review, 6, 41-49
Taylor, S. (1986). Modelling financial time series, Wiley: Chichester
Uyaebo, S. O., Atoi, V. N., & Usman, F. (2015). Nigeria stock market volatility in comparison with some countries. Application of asymmetric GARCH models. CBN Journal of Applied Statistics, 6(2), 133 – 160.
Uzuke, C. A., Obiora-Ilouno, H. O., & Eze F. C. (2016). Time series analysis of all shares index of Nigerian stock exchange: A box-jenkins approach. International Journal of Science, 5(6), 1-23.
Tripathy, T., & Gil-Alana, L. A. (2010). Suitability of volatility models for forecasting stock market returns. A study on the Indian national stock exchange. American Journal of Applied Sciences, 7(11), 1487-1494.
Published
2020-07-03
How to Cite
Bello, A. I. (2020). Re-examining the Effect of Volatility Persistence on Nigerian Stock Market Returns: Mean-Revert Garch Approach: Array. The Journal of Accounting and Management, 10(2). Retrieved from https://dj.univ-danubius.ro/index.php/JAM/article/view/363
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