scholarly journals Modeling stock market return volatility in the presence of structural breaks

2019 ◽  
Vol 8 (5) ◽  
pp. 156-171
Author(s):  
Caroline Michere Ndei ◽  
Stephen Muchina ◽  
Kennedy Waweru
Keyword(s):  
Stock Market ◽  
Risk Premium ◽  
Structural Breaks ◽  
Return Volatility ◽  
Additional Risk ◽  
Volatility Clustering ◽  
Volatility Persistence ◽  
Market Return ◽  
Stock Market Return ◽  
Best Fit

This study sought to model the stock market return volatility at the Nairobi Securities Exchange (NSE) in the presence of structural breaks. Using daily NSE 20 share index for the period 04/01/2010  to  29/12/2017,  the market return volatility was modeled using different GARCH type models and taking into account four endogenously identified structural breaks. The market exhibited a non-normal distribution that was leptokurtic and negatively skewed and also showed evidence for ARCH effects, volatility clustering, and volatility persistence. We found that by considering structural breaks, volatility persistence was reduced, while leverage effects were found to lead to explosive volatility. In addition, investors were not rewarded for taking up additional risk since the risk premium was insignificant for the full period. However, during explosive volatility, investors were rewarded for taking up more risk. Moreover, we found that risk premium, leverage effects, and volatility persistence were significantly correlated. The GARCH (1,1) and TGARCH(1,1) models were found to be the best fit models to test for symmetric and asymmetric effects respectively. While the GARCH models were able to provide evidence for the stylized facts in the NSE, we conclude that the presence or absence of these features is period specific. This especially relates to volatility persistence, leverage effects, and risk premium effects. Caution should, therefore, be taken in using a specific GARCH model to forecast market return volatility in Kenya. It is thus imperative to pretest the data before any return volatility forecasting is done.

scholarly journals Impact of Macroeconomic Variables on Stock Return Volatility: Evidence from Sub-Sahara Africa

2020 ◽  
Vol 4 (2) ◽  
Author(s):  
Peter Ifeanyichukwu Ali ◽  
Samuel M. Nzotta ◽  
A. B. C. Akujuobi ◽  
Chilaka E. Nwaimo
Keyword(s):  
South Africa ◽  
Stock Market ◽  
Stock Markets ◽  
Inflation Rate ◽  
Return Volatility ◽  
Macroeconomic Variables ◽  
Market Return ◽  
Stock Market Return ◽  
Macroeconomic Indicators ◽  
The Impact

The main purpose of this paper was to investigate the impact of macroeconomic variables on stock market return volatility in Sub-Sahara markets. The study concentrated on three stock markets including Ghana, Nigeria and South Africa using GARCH-X (1,1) model on monthly data from January 2000 to December 2017. Preliminary analyses from descriptive statistics show that show mean monthly returns are positive for all the stock markets. Skewness coefficients show that the stock returns and interest rates distribution of all Sub-Sahara Africa stock markets are negatively skewed but inflation rate is positively skewed for Nigeria and South Africa, and flat for Ghana. Excess kurtoses are positive for all the stock markets and macroeconomic indicators, and Jarque-Bera statistics indicate the stock markets’ series and macroeconomic indicators are not normally distributed. The Unit roots tests results indicate that all the stock markets and macroeconomic indicators are first difference stationary. The results of the GARCH-X (1,1) model show that macroeconomic variables do not significantly impact stock market returns volatility in Nigeria, Ghana and South Africa at the 5% significance Level. We therefore recommend that stock market regulators, market participants and investors should concentrate more efforts on other macroeconomic variables aside interest rate and inflation rate, in estimating stock market return volatility in Sub-Sahara Africa.

scholarly journals Impact of the Covid-19 pandemic on stock market return volatility of Gulf Cooperation Council countries

2021 ◽  
Vol 18 (4) ◽  
pp. 45-56
Author(s):  
Tomader Elhassan
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Information Criterion ◽  
Gulf Cooperation Council ◽  
Return Volatility ◽  
Stock Market Returns ◽  
Market Return ◽  
Stock Market Return ◽  
First Case ◽  
The Impact

This study examined the asymmetric impact of the COVID-19 pandemic on the Gulf Cooperation Council (GCC) stock market return volatility. The data included daily closing prices of the GCC stock market from the day of the acknowledgment of the first case of COVID-19 in each country to March 6, 2021. In addition, the study employed generalized autoregressive conditional heteroscedasticity (GARCH) family models. According to the Akaike information criterion, GARCH and exponential GARCH (EGARCH) were the most accurate models. The findings of the GARCH model indicate that the COVID-19 pandemic affected the GCC stock markets. The EGARCH model also confirmed the impact of the COVID-19 pandemic on the GCC stock markets, confirming that the COVID-19 negatively affected GCC stock market returns. The value of the persistence of this volatility continued over a long period. This study has potential implications for investors and policymakers in diversifying investment portfolios and adopting strategies to maintain investor confidence during such crises. Moreover, mechanisms must be developed for reducing risks in financial markets in times of crisis, and central banks should take financial measures to mitigate risks to capital markets. AcknowledgmentsThis achievement was made with the aid of my family’s support, thank you all.

Sign in / Sign up

Export Citation Format

Share Document