Do asymmetric effect and volatility persistence exist in the Nigerian stock market?

Udemezue Ndubisi Nnakee, Chi Aloysius Ngong, Chinyere C. Onyejiaku and Josaphat U.J. Onwumere

International Journal of Mathematics in Operational Research, 2024, vol. 29, issue 2, 145-162

Abstract: Volatility modelling in Nigeria is limited to non-Gaussian models, as many researchers apply the Gaussian process. This paper investigates the leverage effect and volatility persistence in the Nigerian stock market. The generalised autoregressive conditional heteroscedasticity models with asymmetric extensions are employed for the analysis. The findings show no leverage effect with high volatility in the stock market. The model indicates explosive volatility and persistence. The high volatility weakens investors' confidence and prevents market growth and development. The policy-makers should enhance investors' awareness and education to ensure positive risk-taking behaviours that reduce volatility. Institutional quality should be improved to give confidence to investors in the market. The market infrastructure should be improved, and a variety of securities should be offered to attract rational investors. The government should tackle the prevalent activities of terrorists, herdsmen, and kidnappers, which engender uncertainty in the market. More attractive variety of securities should be offered in the market for rational and informed investors. The Nigerian stock market should be diversified via trading in financial derivatives instruments.

Keywords: stock market; leverage effect; volatility persistence; GARCH; error distributions. (search for similar items in EconPapers)
Date: 2024
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