Disentangled oil shocks and stock market volatility in Nigeria and South Africa: A GARCH-MIDAS approach

Mohammed M. Tumala, Afees Salisu and Ali I. Gambo

Economic Analysis and Policy, 2023, vol. 78, issue C, 707-717

Abstract: In this study, we investigate the effects of disentangled oil shocks on the volatility of the stock markets of Nigeria and South Africa using the Mixed Data Sampling variant of the Generalized Autoregressive Conditional Heteroscedasticity (GARCH-MIDAS) model. The disentangled oil shocks involve oil supply shock, economic activity shock, oil consumption demand shock, and oil inventory demand shock covering January 2010 and July 2022. Overall, we find that the stock market volatilities of Nigeria and South Africa respond similarly to oil supply shock and oil consumption demand shock but differently to economic activity shock and oil inventory demand shock. The unusual increase in the volatility of Nigeria’s stock market has been attributed to the loss of investors’ confidence which takes a too long time to be restored. Our results are robust to alternative forecast sampling techniques, particularly fixed and rolling windows.

Keywords: Oil shocks; Stock market volatility; GARCH-MIDAS approach; Nigeria; South Africa (search for similar items in EconPapers)
JEL-codes: G12 G17 Q18 Q31 R11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:78:y:2023:i:c:p:707-717

DOI: 10.1016/j.eap.2023.04.009

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