Kalu O. Emenike

Bio: Kalu O. Emenike is an academic researcher from University of Swaziland. The author has contributed to research in topics: Stock market & Stock exchange. The author has an hindex of 5, co-authored 19 publications receiving 135 citations. Previous affiliations of Kalu O. Emenike include Kampala International University & Rhema University.

Modelling Stock Returns Volatility In Nigeria Using GARCH Models

Abstract: There is quite an extensive literature documenting the behaviour of stock returns volatility in both developed and emerging stock markets, but such studies are scanty for the Nigerian Stock Exchange (NSE). Modelling volatility is an important element in pricing equity, risk management and portfolio management. For these reasons, this paper investigates the behaviour of stock return volatility of the Nigerian Stock Exchange returns using GARCH (1,1) and the GJR-GARCH(1,1) models assuming the Generalized Error Distribution (GED). Monthly All Share Indices of the NSE from January 1999, to December 2008, provided the empirical sample for investigating volatility persistence and asymmetric properties of the series. The results of GARCH (1,1) model indicate evidence of volatility clustering in the NSE return series. Also, the results of the GJR-GARCH (1,1) model show the existence of leverage effects in the series. Finally, the Generalized Error Distribution (GED) shape test reveals leptokurtic returns distribution. Overall results from this study provide evidence to show volatility persistence, fat-tail distribution, and leverage effects for the Nigeria stock returns data.

Efficiency across Time: Evidence from the Nigerian Stock Exchange

Abstract: This paper examines the Weak-Form Efficient Market Hypothesis across time for the Nigerian Stock Exchange (NSE) by hypothesizing Normal Distribution and Random walk in periodic return series. Monthly all share indices of the NSE are examined for three periods including January 1985 to December 1992, January 1993 to December 1999, and January 2000 to December 2007. Our Normality tests are conducted using Skewness, Kurtosis, Kolmogorov-Smirnov, and Q-Q Normal Chart; whereas Random walk is tested using the non-parametric Runs test. Results of the Normality tests show that returns from NSE do not follow normal distribution in all the periods. Runs test results reject the randomness of the return series of the NSE in the periods studied. Overall results from the tests suggest that the NSE is not Weak-Form efficient across the time periods of this study. The results however, show that improvements in NSE trading system have positive effect on efficiency. Relaxing institutional restrictions on trading securities in the market and strengthening the regulatory capacities of NSE and Nigerian Securities and Exchange Commission (NSEC) to enforce market discipline were recommended.

Comparative analysis of bureaux de change and official exchange rates volatility in Nigeria

Abstract: Exchange rates stability is an important monetary policy target. Hence monetary authorities aim at avoiding wide divergence between the official exchange rate and parallel exchange rates in most developing economies. This paper employs GARCH (1,1) and GJR-GARCH (1,1) models to estimate and compare volatilities of official, interbank, and bureaux de change markets Naira/US$ exchange rates for the January 1995–December 2014 period. The results of the study show that the volatilities of interbank and bureaux de change exchange rates in the previous periods influence current volatility of exchange rates. The results also show evidence of volatility clustering in the interbank market and bureaux de change Naira/US$ exchange rates. Sum of the ARCH and GARCH coefficients indicates evidence of volatility persistence in the exchange rates returns series. Comparative analysis between the exchange rates volatilities shows that the magnitude of impact of volatility shocks on current volatility as well as volatility clustering are greater in bureaux de change than in other exchange rates in Nigeria. The asymmetric parameter indicates that exchange rates depreciation tends to produce higher volatility in the immediate future than appreciation of the same magnitude in both the interbank and bureaux de change markets in Nigeria.

How does monetary policy and private sector credit interact in a developing economy

Abstract: This paper evaluates the nature of relationship between monetary policy and private sector credit as well as the impact of structural break on the relationship by applying a battery of econometric tests on Nigeria data. The cointegrating regression results reveal evidence of long-run relationship between monetary policy and credit to private sector. Estimates from the long-run parameter stability tests support cointegration in the presence of structural breaks. Similarly, error correction model results show that changes in credit have positive and significant short-term effects on changes in monetary policy. The results of innovation accounting also provide support to show that innovations in credit have impact on monetary policy. Granger causality analysis exhibits unidirectional causality from credit to monetary policy. The key implication of the findings is that credit to the private sector is an effective channel for monetary policy transmission in Nigeria. It is recommended therefore that monetary authorities in developing countries should consider credit as a major channel for implementing monetary policies.

Volatility Transmission between Stock and Foreign Exchange Markets: Evidence from Nigeria

Abstract: The direction of volatility transmission between stock and foreign exchange markets is important for hedging strategy, portfolio management and financial market regulation. This paper examines volatility transmission between stock and foreign exchange markets by applying the multivariate GARCH model in the BEKK framework to Nigerian stock returns and the Naira/USD exchange rate data from January 1996 to March 2013. Results of the empirical analysis show evidence of volatility clustering in both stock and foreign exchange markets. The results also show bi-directional shock transmission between stock and foreign exchange markets, suggesting that information flow in the foreign exchange market impact the stock market and vice versa. Finally, the results show evidence of a uni-directional volatility transmission from the foreign exchange market to the stock market. The implication is for investors vigilantly to monitor and dissect all information in the two markets as part of their investment strategy.

Modeling stock market volatility using garch models evidence from sudan

Abstract: This paper uses the Generalized Autoregressive Conditional Heteroscedastic models to estimate volatility (conditional variance) in the daily returns of the principal stock exchange of Sudan namely, Khartoum Stock Exchange (KSE) over the period from January 2006 to November 2010. The models include both symmetric and asymmetric models that capture the most common stylized facts about index returns such as volatility clustering and leverage effect. The empirical results show that the conditional variance process is highly persistent (explosive process), and provide evidence on the existence of risk premium for the KSE index return series which support the positive correlation hypothesis between volatility and the expected stock returns. Our findings also show that the asymmetric models provide better fit than the symmetric models, which confirms the presence of leverage effect. These results, in general, explain that high volatility of index return series is present in Sudanese stock market over the sample period.

Macroeconomic Variables, Volatility and Stock Market Returns: A Case of Nairobi Securities Exchange, Kenya

Abstract: This study sought to evaluate the relationship between Gross Domestic Product, Treasury bill rate, exchange rate, inflation and stock market return in Nairobi Securities Exchange Limited. The study determined the response of the stock returns to a shock in each of the macroeconomic variables. The effect of changes in each of the macroeconomic variable on the volatility of stock returns in Nairobi Securities exchange limited was also determined. Engle-Granger two step method was used to establish the co integrating relationship between stock returns and the macroeconomic variables. Threshold Genaralized Autoregressive Conditional Heteroscedasticity (TGARCH) model was used to capture the leverage effects and volatility persistence at the NSE. Published time series quarterly data from 2000 to 2012 was sourced from the Central Bank of Kenya, Kenya National Bureau of Statistics. Empirical results of the regression model revealed that exchange rate showed a significant relationship with stock returns. For a one percentage increase in depreciation of a domestic currency, the model predicted stock returns to decrease by 1.4 percent. Gross Domestic Product, Inflation and the Treasury bill rate indicated insignificant relationships. The effects of one standard deviation shock on each of the macroeconomic variable on stock returns revealed that shock in exchange rate was negative but eventually reverted back to equilibrium thereafter. The results of the TGARCH model for exchange rate, Gross Domestic Product and Treasury bill rate revealed that the impact of news was asymmetric and there was presence of leverage effects. There was absence of volatility persistence among all the macroeconomic variables.

Volatility Spillover between Stock and ForeignExchange Markets: Indian Evidence

Abstract: The study of volatility spillovers provides useful insights into how information is transmitted from stock market to foreign exchange market and vice versa. This paper explores volatility spillovers between the Indian stock and foreign exchange markets. The results indicate that there exists a bidirectional volatility spillover between the Indian stock market and the foreign exchange market with the exception of S&P CNX NIFTY and S&P CNX 500. The findings of the study also suggest that both the markets move in tandem with each other and there is a long run relationship between these two markets. The results of significant bidirectional volatility spillover suggest that there is an information flow (transmission) between these two markets and both these markets are integrated with each other. Accordingly, financial managers can obtain more insights in the management of their international portfolio affected by these two variables. This should be particularly important to domestic as well as international investors for hedging and diversifying their portfolio.

Modelling Stock Market Volatility Using Univariate GARCH Models: Evidence from Sudan and Egypt

Abstract: Stock market volatility in two African exchanges, Khartoum Stock Exchange, KSE (from Sudan) and Cairo and Alexandria Stock Exchange, CASE (from Egypt) is modelled and estimated. The analysis is based on using daily closing prices on the general indices in the two markets over the period of 2nd January 2006 to 30th November 2010. The paper employs different univariate specifications of the Generalized Autoregressive Conditional Heteroscedastic (GARCH) model, including both symmetric and asymmetric models. The empirical results show that the conditional variance (volatility) is an explosive process for the KSE index returns series, while it is quite persistent for the CASE index returns series. The results also provide evidence on the existence of a positive risk premium in both markets, which supports the hypothesis of a positive correlation between volatility and the expected stock returns. Furthermore, the asymmetric GARCH models find a significant evidence for asymmetry in stock returns in the two markets, confirming the presence of leverage effect in the returns series.

Effects of Exchange Rate Volatility on the Stock Market: A Case Study of South Africa

Abstract: This study assessed the effects of currency volatility on the Johannesburg Stock Exchange. An evaluation of literature on exchange rate volatility and stock markets was conducted resulting into specification of an empirical model. The Generalised Autoregressive Conditional Heteroskedascity (1.1) (GARCH) model was used in establishing the relationship between exchange rate volatility and stock market performance. The study employed monthly South African data for the period 2000 – 2010. The data frequency selected ensured an adequate number of observations. A very weak relationship between currency volatility and the stock market was confirmed. The research finding is supported by previous studies. Prime overdraft rate and total mining production were found to have a negative impact on Market capitalisation. Surprisingly, US interest rates were found to have a positive impact on Market capitalisation. The study recommended that, since the South African stock market is not really exposed to the negative effects of currency volatility, government can use exchange rate as a policy tool to attract foreign portfolio investment. The weak relationship between currency volatility and the stock market suggests that the JSE can be marketed as a safe market for foreign investors. However, investors, bankers and portfolio managers still need to be vigilant in regard to the spillovers from the foreign exchange rate into the stock market. Although there is a weak relationship between rand volatility and the stock market in South Africa, this does not necessarily mean that investors and portfolio managers need not monitor the developments between these two variables. DOI: 10.5901/mjss.2013.v4n14p561