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Relationship between Nigeria Stock Exchange and Inflation to Dynamic Conditional Correlation Model |
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PP: 51-56 |
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doi:10.18576/jsapl/040202
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Author(s) |
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Agboola Samson,
Akinwande Michael Olusegun,
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Abstract |
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| The paper studies the relationship between Nigeria Stock Exchange and inflation. Raw daily data between August 2010 to January, 2016 from cashcraft website and CBN. ADF was used to test the unit root of the data were the two variables were stationary all through by taking their first differences which make the series under study to be free from unit root. Presence of heteroscedastic was significant using Lagrange multiplier. The correlation matrix show that the result of the correlation value between NSE and INFL is negatively strong correlation which conclude that an increase in goods and services (Inflation) will effectually have negative impact on the Nigerian Stock Exchange. The model we used to fit the data in our paper is the bivariate DCC-GARCH (1, 1) model. The coefficients for all the parameters are positive while the correlation-Targeting is negative. We can conclude that both of coefficient and correlation- targeting values are very close to 1 and -1, indicating that high persistence in the conditional variances. Furthermore, both of them are between the confident interval (C.I) of 1 and -1, this means that conditional variance is finite and the series are strictly stationary. The forecast graph shows as goods and services increases; the Nigeria Stock Exchange will experience a non-steady shock in the stock market |
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