Analysis of the Effect of Foreign Exchange Market Returns of Emerging African Economies on Nigerian Stock Market Volatility
Nwulu Stephen Onyemere
Department of Finance and Banking, University of Port Harcourt, Nigeria.
Emeka J. Okereke
Department of Finance and Banking, University of Port Harcourt, Nigeria.
Samuel S. Ogunbiyi
Department of Finance and Banking, University of Port Harcourt, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
This research analysed the effect of foreign exchange market returns of emerging African economies on Nigerian stock market volatility. It deployed weekly exchange rate data of the sampled foreign exchange markets and Nigeria Stock market All Share Index for the period. The Econometric tools used were the symmetric Generalised Auto Regressive Conditional Heteroskedacity (GARCH), Asymmetric Threshold GARCH and Power GARCH models. Results show that: Nigerian Stock market volatility was not evidently driven by the influence of the foreign exchange markets of the emerging economies. .The Nigeria stock market volatility is persistent with no asymmetric or leverage effect. Symetric GARCH was proven to have outperformed the other ARCH-type models. There is negative correlation between Nigeria Stock Market returns and Nigeria foreign exchange market and other African countries. The interactions among African Foreign exchange markets are poor. It is recommended that risk monitoring and assessment in the Nigeria stock market should be done with appropriate techniques for objectivity, exclusion of bias and optimal investment outcomes. This study has proven the plausibility of GARCH –type models if the volatility in the market must be described and captured.
Keywords: Drought stress, Nigerian stock market, new germplasm, foreign exchange market, protein spot, volatility, rice and two-dimensional gel electrophoresis, returns, GARCH, TGARCH, power GARCH, all share index, emerging economies
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