Asymmetric Return-Volatility Relationship in the Nigerian Stock Market: Further Evidence from TGARCH and PGARCH models

  • E. Chuke Nwude
  • Kennady Kelechi Nnaji


This paper attempts to explain the asymmetric property of stock returns volatility in the Nigeria stock market in the context of Power GARCH and Threshold GARCH models using both banking sector and market data. The main motivation is the recent market-level evidence reported by Ezirim, Nnaji and Ezirim (2017) that volatility feedback theory is behind the observed asymmetric volatility in the Nigerian stock market. The study is based on 2638 daily price data for ten banks and the market index covering the period from 04/01/2007 to 31/08/2017.Except for two banks, Fidelity and Wema, the PGARCH model is found to be the optimal model for most of the stocks and the market index returns. There is general tendency for bad news (a large price fall) to increase volatility more than good news (a large price rise) of equal size in the Nigerian market. However, these results are not suggestive of any significant asymmetric influence on the volatility for most returns data including the market returns. Again, two banks stand out; WEMA and ETI, both have highly significant asymmetric coefficients. Consistent with the leverage-based explanation, the coefficient linking conditional variance and returns is found to be negative for eight out of the eleven stocks examined. This estimate is however, positive for the market index, fidelity and GTB.