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

Iorember, Paul and Sokpo, Joseph and Usar, Terzungwe (2017): Inflation and Stock Market Returns Volatility: Evidence from the Nigerian Stock Exchange 1995Q1-2016Q4: An E-GARCH Approach. Published in: International Journal of Econometrics and Financial Management , Vol. 2, No. 5 (28 November 2017): pp. 69-76.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inflation, stock market returns, Exponential Generalized Autoregressive Conditional Heteroskedasticity (E-GARCH)
• Subjects: P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P34 - Financial Economics

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