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Inflation and Stock Market Returns Volatility: Evidence from the Nigerian Stock Exchange 1995Q1-2016Q4: An E-GARCH Approach

Paul Iorember, Joseph Sokpo and Terzungwe Usar

MPRA Paper from University Library of Munich, Germany

Abstract: The paper investigated the effect of inflation on stock market returns on the Nigerian stock exchange market, employing a volatility modeling approach. Using monthly data on stock market returns and consumer price index inflation rate, the paper employed GARCH and E-GARCH volatility modeling techniques for analysis. The study found that CPI inflation is not an important variable in explaining stock market return volatility in Nigeria. The E-GARCH model did not find existence of asymmetry in the stock return series; that is good news and bad news have identical impact on stock returns in Nigeria. The GARCH model show high persistence in the stock returns series, though a shock to stock returns has only a temporary impact.

Keywords: Inflation; stock market returns; Exponential Generalized Autoregressive Conditional Heteroskedasticity (E-GARCH) (search for similar items in EconPapers)
JEL-codes: P34 (search for similar items in EconPapers)
Date: 2017-11-12
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Published in International Journal of Econometrics and Financial Management 5.2(2017): pp. 69-76

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