Title: Do asymmetric effect and volatility persistence exist in the Nigerian stock market?

Authors: Udemezue Ndubisi Nnakee; Chi Aloysius Ngong; Chinyere C. Onyejiaku; Josaphat U.J. Onwumere

Addresses: Department of Banking and Finance, Alex Ekwueme Federal University, Ikwo, Ebonyi State, Nigeria ' Department of Banking and Finance, University of Nigeria, Enugu Campus, Ademola Street, Ogui 401105, Enugu, Nigeria ' Department of Management, University of Nigeria, Enugu Campus, Ademola Street, Ogui 401105, Enugu, Nigeria ' Department of Banking and Finance, University of Nigeria, Enugu Campus, Ademola Street, Ogui 401105, Enugu, Nigeria

Abstract: Volatility modelling in Nigeria is limited to non-Gaussian models, as many researchers apply the Gaussian process. This paper investigates the leverage effect and volatility persistence in the Nigerian stock market. The generalised autoregressive conditional heteroscedasticity models with asymmetric extensions are employed for the analysis. The findings show no leverage effect with high volatility in the stock market. The model indicates explosive volatility and persistence. The high volatility weakens investors' confidence and prevents market growth and development. The policy-makers should enhance investors' awareness and education to ensure positive risk-taking behaviours that reduce volatility. Institutional quality should be improved to give confidence to investors in the market. The market infrastructure should be improved, and a variety of securities should be offered to attract rational investors. The government should tackle the prevalent activities of terrorists, herdsmen, and kidnappers, which engender uncertainty in the market. More attractive variety of securities should be offered in the market for rational and informed investors. The Nigerian stock market should be diversified via trading in financial derivatives instruments.

Keywords: stock market; leverage effect; volatility persistence; GARCH; error distributions.

DOI: 10.1504/IJMOR.2024.142136

International Journal of Mathematics in Operational Research, 2024 Vol.29 No.2, pp.145 - 162

Received: 17 Apr 2023
Accepted: 23 Apr 2023
Published online: 08 Oct 2024 *

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