Professional paper

https://doi.org/10.30924/mjcmi.26.1.11

A investigation into share prices’ conditional heteroscedasticity and non-symmetrical model in the context of South Africa, Nigeria, and Egypt

Abdullah Ejaz ; Bredin College of Business and Health Care, Edmonton, Canada
Petr Polak ; Mendel University in Brno, Czech Republic
Zulfiqar Ali Imran ; University of Lahore, Lahore Business School, Pakistan

Abstract

This paper investigates the leverage effect in African countries by applying normal and non-normal distribution densities. Furthermore, we investigate the possible opportunities for portfolio diversification in South Africa, Nigeria, and Egypt. We find that negative stock returns do not generate higher volatility in further returns than past positive returns. All three countries are subject to the ARCH effect, where past stock information (volatility) influence the current stock returns (volatility). We also find that Gaussian distribution produces a better estimate as compared to non-normal distribution. In terms of portfolio diversification, returns are also subject to the ARCH effect, however, the leverage effect does not determine that past negative returns influence the current stock returns asymmetrically.

Keywords

volatility; GARCH models; ARCH effect; portfolio diversification; correlation; normal and non-normal distribution

Hrčak ID:

259186

URI

https://hrcak.srce.hr/259186

Publication date:

30.6.2021.

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