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Volatility, Spillover Effects among Foreign Exchange Rates,Oil Price Fluctuation and the Nigerian Stock Exchange: A Multivariate VAR-EGARCH-CC Analysis

AUTHOR(S):

O. Osabuohien-Irabor

JOURNAL: Journal of the Nigerian Statistical Association Vol. 28, 2016
YEAR: 2016

ABSTRACT

This paper examines the hidden dynamics prices changes and the volatility spillover among foreign exchange market (Naira/USD, Naira/GBP), stock exchange market (NSE-30) and the crude oil market (WTI). The methodology of the study is the fusion of the Constant Correlation (CC) model to the Vector Autoregressive Exponential Generalized Autoregressive Conditional Heteroskedasticity (VAR(1)-EGARCH(1,1)) model, to examine the spillover effects as well as capture the time series stylized facts. This approach is quite different from the popular Koutmos (1996) multivariate EGARCH methodology which may lead to inaccurate parameter estimate due to the imposed constraints. Our findings suggest the existence of leverage effect in the currency market (Naira/USD, Naira/GBP) and in crude oil market. Besides the high persistent of volatility in the currency market (Naira/USD, Naira/GBP) and the stock market (NSE-30), there is also dominance of shocks in the local market. This paper will be of immense benefit to the practitioner, academic scholars and policies makers on the inter-relationship among these variables.


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2016

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