Return-Volatility Interactions in the Nigerian Stock Market
Journal Title: Asian Economic and Financial Review - Year 2012, Vol 2, Issue 2
Abstract
The study employed the GARCH (1, 1) and VAR models to ascertain the relationship between volatilities in the monetary policy variables and volatilities in the stock market returns in Nigeria between 1980 and 2010.The study showed that only exchange rate policy variable have an influence on the stock market volatility with a negative coefficient but statistically significant indicating that higher volatility in the exchange rate dampens stock market activities. This means that an increase in exchange volatility will lead to a fall in stock market volatility. Additionally, result showed that M1granger causes very significantly M2 and vice versa. Implicitly, it shows that there is “bi-directional causality” or a “bi-directional feedback” between M1 andM2.What this implies is that stabilizing interest rate will reduce the volatility in the stock market. The study also observed that there is no effect of international factor and influence on the stock market returns implying that international volatilities is not transmitted across national stock markets in Nigeria. Finally, there is the presence of volatility shocks. The study therefore suggested that government policy should focus on exchange rate to stabilize the stock market. Investors are also advised to consider the nature of volatility in exchange rate before making investment decisions.
Authors and Affiliations
MARGARET N. OKOLI| Department of Financial Management, School of Management Technology, Federal University of Technology, Owerri, Imo State, Nigeria
Keywords
Related Articles
- EP ID EP1782
- DOI -
- Views 493
- Downloads 33
SUGGEST SOLUTIONS FOR DIFFUSION AND IMPLEMENTATION OF ACTIVITY-BASED COSTING IN VIETNAM
Activity-Based Costing (ABC) was developed by Robert S. Kaplan in the mid-1980s and up to now the academics, researchers as well as accounting practitioners have perceived it as the normative appropriate cost system. It...
TRADE LIBERALIZATION AND FORMAL-INFORMAL SECTOR WAGE DIFFERENTIAL IN NIGERIA
This study assessed the role of trade liberalization on the formal-informal sector of Nigeria. It examined whether or not the trade liberalization process have any effect on both the reduction in the wage differential be...
ACCOUNTING FROM A RELIGIOUS PERSPECTIVE: A CASE OF THE CENTRAL GOVERNMENT ACCOUNTING IN ISLAMIC REPUBLIC OF PAKISTAN
Purpose¬ - The purpose of this paper is to describe and analyze the role of religion (Islam) in the development of accounting at the central government in Islamic Republic of Pakistan.Design/methodology/approach – It is...
WAGNER’S LAW IN SAUDI ARABIA 1970 - 2012: AN ECONOMETRIC ANALYSIS
Our goal in this paper is to explorethe validity of Wagner’s Law in Saudi Arabia during the period (1970-2012) for real oil GDP and Non-oil GDP.Wagner’s Law investigated that fundamental economic growth is validity to th...
EFFECTS OF IMPUTATION RATIO CHANGE ON OPEN ECONOMY IN THE INTEGRATED INCOME TAX SYSTEM
In this paper, we investigate a representative individual who is both a consumer and a producer, and when the personal income tax of can be deducted from the paid corporate tax, how macroeconomic variables (e.g. consumpt...