Open AccessComparative Modelling of Price Volatility in Nigerian Crude Oil Markets Using Symmetric and Asymmetric GARCH Models
Author(s) -
Deebom Zorle Dum,
Mazi Yellow Dimkpa,
Chims Benjamin ELE,
Richard Igbudu Chinedu,
George Laurretta Emugha
Publication year - 2021
Publication title -
asian research journal of mathematics
Language(s) - English
Resource type - Journals
ISSN - 2456-477X
DOI - 10.9734/arjom/2021/v17i330282
Subject(s) - autoregressive conditional heteroskedasticity , volatility (finance) , econometrics , autoregressive model , crude oil , heteroscedasticity , economics , mathematics , engineering , petroleum engineering
The study aimed at developing an appropriate GARCH model for modelling in Nigerian Crude Oil Prices Markets using symmetric and Asymmetric GARCH models while the specific objectives of the study include to: build an appropriate Symmetric and asymmetric Generalized Autoregressive Conditional Heteroskedacity (GARCH) model for Nigerian Crude Oil Prices, compare the advantage of using Symmetric and Asymmetric GARCH. The data for the study was extracted from the Central Bank of Nigeria online statistical database starting from January, 1982 to December, 2018. The software used in estimating the parameters of the model is Econometric view (Eview) software version ten (10). Two classes of models were used in the study; they are symmetric and Asymmetric GARCH models. The results of the estimated models revealed that Asymmetric GARCH model (EGARCH (1,1) in student’s-t error assumption gave a better fit than the first order Symmetric GARCH models. Also, Using EGARCH (1,1) models with their corresponding error distribution in estimating crude oil price was found that the larger the size of the estimated news components of the model, the higher the negative news associated with high impact of volatility. This means that conditional volatility estimated using EGARCH model has strong asymmetric characteristic which is prone to news sensitivity. Based on the above findings, recommendations were made in the study.