Open AccessVolatility transmission between money and stock markets: Evidence from a developing financial market
Author(s) -
Kalu O. Emenike
Publication year - 2017
Publication title -
journal of economic and financial sciences
Language(s) - English
Resource type - Journals
eISSN - 2312-2803
pISSN - 1995-7076
DOI - 10.4102/jef.v9i1.40
Subject(s) - diversification (marketing strategy) , volatility (finance) , economics , stock market , monetary economics , financial economics , stock market bubble , market depth , portfolio , business , paleontology , horse , marketing , biology
The direction and intensity of volatility transmission between the money and stock markets are important for portfolio selection and diversification, optimal hedging strategy, financial market regulation, and risk management. The purpose of this paper therefore is to examine the nature of volatility transmission between money and stock markets in a developing economy using Nigeria data. The results of the bivariate BEKK-GARCH (1,1) model show strong evidence of ARCH and GARCH effects for both the money and stock markets returns. The results also suggest unidirectional shock transmission from the stock market to the money but not otherwise. Further, the results indicate evidence of a unidirectional volatility transmission from the stock market to the money market. The findings of this study have implications for portfolio selection and diversification as well as financial market regulation.