Stock-return volatility persistence over short and long range horizons: Some empirical evidences

Authors

  • Kolawole Subair Department of Economics, Yusuf Maitama Sule University (Formerly Northwest University) City Campus, Kofa Nassarawa Road, Kano State, Nigeria
  • Ajibola Arewa Department of Banking and Finance, Lagos State University, Ojo, Lagos State, Nigeria

DOI:

https://doi.org/10.22437/ppd.v7i4.8795

Keywords:

Forecasting models, Memory failure, Nigeria, Short range and long range horizons, Stock-return volatility

Abstract

In this paper, we account for memory failure or otherwise in the daily evolution of stock return and volatility within the purview of short and long ranges based on the arrival of fundamental news. This accounts for the return on assets in the current period to be a function of returns realized in the pasts. To achieve this objective, we estimated ARMA, ARFIMA, GARCH, FIGARCH and HYGARCH models. After implementing maximum likelihood estimation technique, we found out that the ARMA coefficients were not significant, the GARCH coefficients were significant and the memory coefficients in terms of ARFIMA, FIGARCH and HYGARCH were statistically significant. In the light of these, we propose the rejection of efficient hypothesis in the long range and document a single memory in volatility in the short range. The study recommends that ARFIMA and HYGARCH are the best forecasting models for return and volatility respectively in the Nigerian stock market.

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Author Biographies

Kolawole Subair, Department of Economics, Yusuf Maitama Sule University (Formerly Northwest University) City Campus, Kofa Nassarawa Road, Kano State, Nigeria

KOLAWOLE SUBAIR, PhDs. in Economics and Business & Applied Economics (Finance Option) is a Professor in the Department of Economics, Yusuf Maitama Sule (Formerly Northwest) University, Kano, Nigeria and Visiting Professor of Business and Economics at American Heritage University of Southern California. He is the Editor-In-Chief of Journal of Economics and Allied Studies while also serving as an editorial board member of the Market Forces Journal of Business, Management and Economics, Pakistan, Yobe Journal of Economics, Nigeria as well as Journal of Modern Economy, United States. He has published articles in books and several scholarly journals. He is a member of various professional associations and networks; these include the American Economic Association, the Midwest Economics Association, Royal Economic Society, the Nigerian Economic Society, and the Nigerian Society for Financial Research, International Development Economics Associates, and Social Science Research Network.

 

Ajibola Arewa, Department of Banking and Finance, Lagos State University, Ojo, Lagos State, Nigeria

Ajibola Arewa, PhD is a Lecturer and Researcher based in Lagos State University, Nigeria. He draws his research inspiration from the heroic work of Sharpe, and Litner. For the past ten years, he has sufficiently demonstrated prowess with track record of academic publications in learned journals. He ardently supports the spirit of mentorship and serves the university in different capacities. He is recognized as an expert in Financial Modelling. His educational background includes B.Sc and M.Sc in Banking and Finance both from University of Ado-Ekiti (now Ekiti State University). He obtained a Doctor of Philosophy in Finance and Banking from the University of PortHarcourt, Nigeria.

 

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Published

2020-02-29 — Updated on 2020-02-29

How to Cite

Subair, K., & Arewa, A. (2020). Stock-return volatility persistence over short and long range horizons: Some empirical evidences. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 7(4), 375 - 392. https://doi.org/10.22437/ppd.v7i4.8795

Issue

Vol. 7 No. 4 (2020): Jurnal Perspektif Pembiayaan dan Pembangunan Daerah

Section

Articles

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Copyright (c) 2020 Kolawole Subair, Ajibola Arewa

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This work is licensed under a Creative Commons Attribution 4.0 International License.