TITLE:
Fitting the Nigeria Stock Market Return Series Using GARCH Models
AUTHORS:
U. Usman, H. M. Auwal, M. A. Abdulmuhyi
KEYWORDS:
GARCH Model, Returns, Fitting, Ranking
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.7,
December
14,
2017
ABSTRACT: This study investigated the performance of eleven competing time series GARCH models for fitting
the rate of returns data, monthly
observations on the index returns series of the market over the period of
January 1996 to December 2015 was used. From the results obtained from the Log
Likelihood (Log L), Schwarzs Bayesian Criterion (SBC) and the Akaike
Information Criterion (AIC) values it was found that the models identified was not the same for the two periods (Training and
Testing period) that is for Training period were CGARCH (1,1) and EGARCH (1,1)
while for Testing period were ARCH (1) and GARCH (2,1). The two extreme classes of
models are identified to represent the best and the worst groups respectively.
The overall effect of this will tend to increase the volatility of the market
returns. The paper therefore recommended that the Nigeria government should as
a matter of urgency take appropriate positive measures through the security and exchange commission to
regulate the market volatility so that the provided market index could be
safely used as predictive index for measuring the performance of the firms and
as a guide for investment purpose.