Dynamic spillovers between stock and money markets in Nigeria: A VARMA-GARCH approach

Afees Salisu, Kazeem Isah and Alberto Assandri
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Alberto Assandri: "Independent Researcher, Italy"

Review of Economic Analysis, 2019, vol. 11, issue 2, 255-283

Abstract: "This study examines probable dynamic spillover transmissions between the Nigerian stock and money markets using the multivariate volatility framework that simultaneously accounts for both returns and shock spillovers. Based on relevant pre-tests, the VARMA-CCC-GARCH framework is selected and consequently employed to model the spillovers. The study finds significant cross-market return and shock spillovers between the two markets. Thus, a shock to one market is more likely to spill over to the other market. It is also observed that shocks have persistent effects on stock market volatility but transitory effects on money market volatility. In other words, shocks to the money market die out over time while shocks to stock market tend to persist over time. In addition, including lagged own shocks and lagged own conditional variance when forecasting the future volatility of both return series may enhance their forecast performance. An alternative approach proposed by Diebold and Yilmaz (2012) is also employed for robustness and the results are consistent with those obtained from the VARMA-CCC-GARCH model."

Keywords: "Return Spillover; Shock Spillover; Shork Persistence; VARMA-CCC-GARCH" (search for similar items in EconPapers)
Date: 2019
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