Parameterization of Asymmetric News Effect and African Stock Market Returns Volatility Within EGARCH Framework

Ejem, Chukwu Agwu, PhD

Abstract

This study on parameterization of asymmetric news effect and African stock market returns volatility within EGARCH Framework engaged 15 stock exchanges. After, the analysis it was found that the asymmetric parameter for the countries under study except Cote D’Ivoire, Nigeria and Tunisia confirm that bad news create more volatility than good news of the same magnitude, corroborating with the leverage effect theory that opined that bad news create more volatility than good news of the same magnitude. Magnitude effect (volatility clustering) coefficient of EGARCH is positive and significant for countries. That means the conditional volatility will rise or fall when the absolute value of the standardized residual is larger (smaller). It was also found that volatility takes a long time to die following any crisis in the respective market. In the light of the above findings, the researcher is the opinion that African stock markets should endeavour to make timely disclosure and appropriate dissemination of perceived economic vagaries, as well proffer commensurate palliative or solution to the public or investors. This will help to avert escalation of such information as bad news which increases volatility.

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