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International Journal of Econometrics and Financial Management
ISSN (Print): 2374-2011 ISSN (Online): 2374-2038 Website: https://www.sciepub.com/journal/ijefm Editor-in-chief: Tarek Sadraoui
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International Journal of Econometrics and Financial Management. 2017, 5(2), 69-76
DOI: 10.12691/ijefm-5-2-6
Open AccessArticle

Inflation and Stock Market Returns Volatility: Evidence from the Nigerian Stock Exchange 1995Q1-2016Q4: An E-GARCH Approach

Joseph Tarza Sokpo1, Paul Terhemba Iorember1, and Terzungwe Usar2

1Benue State University Makurdi, Nigeria

2University of Ibadan, Ibadan-Nigeria

Pub. Date: November 10, 2017
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Cite this paper:
Joseph Tarza Sokpo, Paul Terhemba Iorember and Terzungwe Usar. Inflation and Stock Market Returns Volatility: Evidence from the Nigerian Stock Exchange 1995Q1-2016Q4: An E-GARCH Approach. International Journal of Econometrics and Financial Management. 2017; 5(2):69-76. doi: 10.12691/ijefm-5-2-6

Abstract

The paper investigated the effect of inflation on stock market returns on the Nigerian stock exchange market, employing a volatility modeling approach. Using monthly data on stock market returns and consumer price index inflation rate, the paper employed GARCH and EGARCH volatility modeling techniques for analysis. The study found that CPI inflation is not an important variable in explaining stock market return volatility in Nigeria. The EGARCH model did not find existence of asymmetry in the stock return series; that is good news and bad news have identical impact on stock returns in Nigeria. The GARCH model show high persistence in the stock returns series, though a shock to stock returns has only a temporary impact.

Keywords:
inflation stock market returns Exponential Generalized Autoregressive Conditional Heteroskedasticity (E-GARCH)

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