Stock Returns And Volatility İn An Emerging Equity Market. Evidence From Kenya

Ndwiga, David; Muriu, Peter

doi:10.19044/esj.2016.v12n4p79

Cited by 10 publications

(11 citation statements)

References 22 publications

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“…These findings agree with the results obtained by Bahadur (2008) using the Nepalese stock market data; Jayasuriya, Shambora and Rossiter ( 2009) analysing mature and emerging markets; Cheng, Jahn-Pavar and Rothman (2010) considering stock markets in the Middle East and North Africa; and Niyitegeka and Tewari (2013) analysing South African stock exchange. Such results drive home the point that positive shocks and negative shocks both have the same effect on future volatility (Ndwiga & Muriu 2016). The absence of leverage effects can be attributed to price limits restrictions, call over market systems and the absence of overreaction (underreaction) to bad news and under-reaction (overreaction) to good news.…”

Section: Literature Reviewmentioning

confidence: 83%

Dynamic volatility behaviour of stock markets in southern Africa

Mashamba

Magweva

2019

J. econ. financ. sci.

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Orientation: The behaviour of stock market return volatility and implications thereof in Southern African Development Committee (SADC).Research purpose: The main aim of this study was to examine leverage effects and volatility persistence in selected southern African stock markets.Motivation for the study: To examine the volatility of stock markets in SADC which has implications on investment risk.Research approach, design and method: The study adopted exponential generalised autoregressive conditional heteroscedasticity (1.1) model using generalised error distribution and Student’s t-distribution.Main findings: Leverage effects were evidenced in Namibia and South Africa. Other nations reflected mixed results depending on the error distribution assumed. Volatility persistence was noted in all nations save for Malawi.Practical/managerial implications: Investors in Namibia and South Africa are encouraged to include leverage effects in portfolio optimisation and value-at-risk computations. Firms raising funds in these nations should be prepared to incur a risk premium as compensation to creditors for assuming high risk. As such raising capital in such nations is expected to be expensive and difficult coupled by market illiquidity, other things being equal. Except for Malawi, firms operating in other SADC nations are encouraged to hedge their operations as the level of stock market volatility is persistent and notable.Contribution/value-add: The study focused on countries that are excluded from recent studies using current models of volatility. A comparison is therefore possible at country level and using two different error distribution assumptions which concretise the results.

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Section: Literature Reviewmentioning

confidence: 83%

Dynamic volatility behaviour of stock markets in southern Africa

Mashamba

Magweva

2019

J. econ. financ. sci.

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“…al., 2017, they concluded that the NSE exhibited high volatility persistence. On the contrary, Ndwiga and Muriu (2016) found evidence for volatility persistence at the NSE but not highly persistent. In addition, Alagidede and Panagiotidis (2009), Chege et.…”

Section: Literature Reviewmentioning

confidence: 80%

“…Using data for the period 01/01/2008 to 10/10/2010, they found evidence for time varying stock return volatility, and negative return shock increases volatility than positive returns shocks. Ndwiga and Muriu (2016) analyzed the dynamics of conditional stock returns volatility for the period 2/01/2001-31/03/2014 using symmetric and asymmetric models. They found that the NSE returns are predictable, the market volatility effects on the stock returns are not explosive, the market rewards increased risk, the market exhibit volatility clustering, and there is a day of the week effect on Thursday and Tuesday due to the sale of government securities.…”

Section: Literature Reviewmentioning

confidence: 99%

Modeling stock market return volatility in the presence of structural breaks

Ndei

Muchina

Waweru

2019

IJRBS

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This study sought to model the stock market return volatility at the Nairobi Securities Exchange (NSE) in the presence of structural breaks. Using daily NSE 20 share index for the period 04/01/2010 to 29/12/2017, the market return volatility was modeled using different GARCH type models and taking into account four endogenously identified structural breaks. The market exhibited a non-normal distribution that was leptokurtic and negatively skewed and also showed evidence for ARCH effects, volatility clustering, and volatility persistence. We found that by considering structural breaks, volatility persistence was reduced, while leverage effects were found to lead to explosive volatility. In addition, investors were not rewarded for taking up additional risk since the risk premium was insignificant for the full period. However, during explosive volatility, investors were rewarded for taking up more risk. Moreover, we found that risk premium, leverage effects, and volatility persistence were significantly correlated. The GARCH (1,1) and TGARCH(1,1) models were found to be the best fit models to test for symmetric and asymmetric effects respectively. While the GARCH models were able to provide evidence for the stylized facts in the NSE, we conclude that the presence or absence of these features is period specific. This especially relates to volatility persistence, leverage effects, and risk premium effects. Caution should, therefore, be taken in using a specific GARCH model to forecast market return volatility in Kenya. It is thus imperative to pretest the data before any return volatility forecasting is done.

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“…The empirical review focuses only on the Nigerian stock market and other African stock markets. Ndwiga and Muriu (2016) showed no evidence of leverage effect and high volatility persistence but found significant positive relationship between risk and return in the Kenyan stock market. Owidi and Mugo-Waweru (2016) showed that volatility is more persistent during the bullish period than bearish period in the Kenyan stock market.…”

Section: Empirical Reviewmentioning

confidence: 89%

Modelling Volatility Persistence and Asymmetry with Structural Break: Evidence from the Nigerian Stock Market

Adewale

Olufemi

Oseko

2017

JEBS

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This study contributes to existing literature on the Nigerian stock market by modelling the persistence and asymmetry of stock market volatility taking into account structural break. It utilises returns generated from data on monthly all-share index from January 1985 to December 2014. After identifying structural break in the return series, the study splits the sample period into pre-break period (January 1985 â€“ November 2008) and post-break period (January 2009 â€“ December 2014). Using the symmetric GARCH model, the study shows that the sum of ARCH and GARCH coefficients is higher in the pre-break period compared to the post-break period, thus indicating that persistence of shock to volatility is higher before structural break in the market. The asymmetric GARCH model provides no evidence of asymmetry as well as leverage effect with or without accounting for structural break in the Nigerian stock market. This study concludes that the Nigerian stock market is characterised by inefficiency, high degree of uncertainty and non-asymmetric volatility.Keywords: Persistence, asymmetry, stock market volatility, structural break

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Stock Returns And Volatility İn An Emerging Equity Market. Evidence From Kenya

Cited by 10 publications

References 22 publications

Dynamic volatility behaviour of stock markets in southern Africa

Dynamic volatility behaviour of stock markets in southern Africa

Modeling stock market return volatility in the presence of structural breaks

Modelling Volatility Persistence and Asymmetry with Structural Break: Evidence from the Nigerian Stock Market

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