News on Stock Market Returns and Conditional Volatility in Nigeria: An EGARCH-in-Mean Approach

Godwin Okpara

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims at exploring the relationship between news on the stock market returns and conditional volatility in Nigeria. To determine this relationship, the researcher employed the exponential generalized conditional Heteroscedasticity (EGARCH) in mean model since the model accommodates asymmetric and leverage property. The results of the analysis shows that there is a significant relationship between stock market returns and conditional volatility. Secondly, that the persistence of shocks in the market takes a short time to die out, thirdly, that the stock market volatility is less sensitive to market events while asymmetric effect is positive and significant indicating that good news lowers volatility in Nigeria. In the light of the findings, the researcher suggests that Nigeria stock exchange should ensure that company specific information should be reliable with maximum transparency and speedy dissemination. Also, with the already existing good news lowering volatility and cost of capital in the economy, Government should avoid unnecessary modifications of her policies that are capable of changing the market trading pattern. These measures, the researcher believes, will bridge up information asymmetry and enhance the sensitivity of volatility to market events.

Keywords: Stock returns; EGARCH in mean; information asymmetry; bad news; good news. (search for similar items in EconPapers)
JEL-codes: C32 E32 F65 (search for similar items in EconPapers)
Date: 2020-08-12, Revised 2020-08-12
New Economics Papers: this item is included in nep-ets, nep-fmk, nep-mac and nep-ore
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