EAS Publisher | Money Market Indicators and Stock Market Volatility in Nigeria: Evidence from GARCH-in-Mean Model

Money Market Indicators and Stock Market Volatility in Nigeria: Evidence from GARCH-in-Mean Model

DOI : https://doi.org/10.36349/easjebm.2022.v05i09.003

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This study examines the impact of money market variables on stock market volatility in Nigeria using an annual dataset from 1985 to 2021. Indicators of the money market, including certificates of deposit, commercial papers, bankers' acceptance, and treasury bills, were employed in the study. The Generalized Autoregressive Conditional Heteroskedasticity (GARCH-in mean) model was used to generate volatility of stock market index and a nexus between the variables. The findings showed that while commercial paper and treasury bills have no effect on stock market volatility in Nigeria, certificates of deposit and bankers' acceptance do. This study suggests increasing investment in money market indicators, particularly a certificate of deposit and bankers' acceptance, to lower investment risk and volatility of the stock market index.

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