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Volume 9, Issue 4, July 2020, Page: 80-89
A Markov Regime Switching Approach of Estimating Volatility Using Nigerian Stock Market
Yahaya Haruna Umar, Statistics Department, Faculty of Science, University of Abuja, Abuja, Nigeria
Matthew Adeoye, Statistics Department, Faculty of Science, University of Abuja, Abuja, Nigeria
Received: Jan. 26, 2020;       Accepted: Apr. 7, 2020;       Published: May 28, 2020
DOI: 10.11648/j.ajtas.20200904.11      View  61      Downloads  49
Abstract
Understanding and forecasting the behavior of volatility in stock market has received significant attention among researchers and analysts in the last few decades due to its crucial roles in financial markets. Portfolios managers, option traders, and market makers are all interested in the possibility of forecasting, with a reasonable level of accuracy. This study examined the volatility on the Nigeria stock market by comparing two Markov regime switching Autoregressive (MS-AR) Models estimated at different lagged values using the Nigeria stock exchange monthly All Share Index data from 1988 to 2018 in the Central Bank of Nigeria (CBN) Statistical Bulletin. It was found that factors like financial crisis, information flow, trading volume, economical aspects and investor’s behavior are the causes of volatility in the stock market. The results and forecasts obtained from the statistical analysis in this research showed that the stock market will experience a steady growth in 2020 and beyond. Also, the stock market is experiencing fluctuations in the price indices which show that over the years, investors have been exposed to some certain risks in the time past. We therefore recommended that researchers should focus more attention in developing robust statistical model that will reflect and continue to monitor future trends and realities.
Keywords
Markov Regime Switch, Stock Returns, Volatility Clustering, Financial Crisis
To cite this article
Yahaya Haruna Umar, Matthew Adeoye, A Markov Regime Switching Approach of Estimating Volatility Using Nigerian Stock Market, American Journal of Theoretical and Applied Statistics. Vol. 9, No. 4, 2020, pp. 80-89. doi: 10.11648/j.ajtas.20200904.11
Copyright
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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