Volatility Modeling of Monthly Stock Returns In Nigeria Using Garch Model
Journal Title: IOSR journal of Business and Management - Year 2018, Vol 20, Issue 7
Abstract
Modeling volatility is an important element in pricing equity, risk management and portfolio management. Also modeling volatility will improve the usefulness of stock prices as a signal about the intrinsic value of securities, thereby, making it easier for firms to raise fund in the market. Therefore this study, study the nature and behavior of Stock Returns Volatility modeling of Nigerian for the periods of 324 months. The results ARCH effect (α1) is at statistically significant level. This indicates that news about volatility from the previous t periods has an explanatory power on current volatility. GARCH (1,1) model is highly persists. Indicate evidence of volatility clustering in the NSE returns series. And the results of the GJR-GARCH (1,1) model shows the existence of leverage effects in the series. Finally, the parameters α0 and α1 are greater than 0, and β1 is positive. Thus, the GARCH (1,1) seems quite good for explaining the behavior of stock returns volatility in Nigeria. Overall results from this study provide evidence to show volatility persistence, fat-Tail distribution, and leverage effects for the Nigeria stock returns.
Authors and Affiliations
Gambo Isah Diri, Abubakar Bello, A. U Shelleng, Yahaya Ajiya, S. O. Oladejo
Keywords
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- EP ID EP412088
- DOI 10.9790/487X-2007020107.
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