Stock-return volatility persistence over short and long range horizons: Some empirical evidences

Kolawole Subair (Department of Economics, Yusuf Maitama Sule University (Formerly Northwest University) City Campus, Kofa Nassarawa Road, Kano State, Nigeria)
Ajibola Arewa (Department of Banking and Finance, Lagos State University, Ojo, Lagos State, Nigeria)

Jurnal Perspektif Pembiayaan dan Pembangunan Daerah
Vol. 7 No. 4 (2020): Jurnal Perspektif Pembiayaan dan Pembangunan Daerah

In this paper, we account for memory failure or otherwise in the daily evolution of stock return and volatility within the purview of short and long ranges based on the arrival of fundamental news. This accounts for the return on assets in the current period to be a function of returns realized in the pasts. To achieve this objective, we estimated ARMA, ARFIMA, GARCH, FIGARCH and HYGARCH models. After implementing maximum likelihood estimation technique, we found out that the ARMA coefficients were not significant, the GARCH coefficients were significant and the memory coefficients in terms of ARFIMA, FIGARCH and HYGARCH were statistically significant. In the light of these, we propose the rejection of efficient hypothesis in the long range and document a single memory in volatility in the short range. The study recommends that ARFIMA and HYGARCH are the best forecasting models for return and volatility respectively in the Nigerian stock market.