CONTAGIOUS EFFECTS AND PASS-THROUGH MARVEL AMONG FINANCIAL ASSETS IN NIGERIAN FINANCIAL MARKETS
Abstract
This paper sets out to empirically ascertain the evidence of cascading effects and pass through marvel among financial assets in Nigerian financial market for the period of 2019 to 2025 by using quarterly data. We employ the maximum log-likelihood method with the BEKK approach, a widely used Multivariate Generalized Autoregressive Conditional Heteroskedasticity-in Mean (MGARCH-M) model designed to estimate conditional volatility and covolatility (covariance) in financial time series. The major findings of this study, which focuses on asset performance indicators, cascading and most importantly, contagious effects in Nigerian financial markets are that it clearly confirms the evidence of dual pass through of volatility in both bond market and stock market. No such evidence in Treasury bill and bond markets, since there is one-way transmission of volatility from the Treasury bill market to bond market. In view of the conclusion set above, the following recommendations are made for choosing appropriate investment mix. Investors should diversify efficiently by holding a portfolio of either stocks and treasury bills or bond and treasury bills. They should discount inefficient diversification that arise when the same factors could influence the assets in a portfolio. Investors should invest in Treasury bill, and choose either bond or stock. Bond if the investors are risk averter, otherwise stock. The stock and Treasury bill markets are highly contagious; therefore, investors operating in these markets should hedge their investments by trading forward.
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Published in Journal of Finance, Governance & Strategic Studies
ISSN: 2714-2573
This article appears in our peer-reviewed academic journal
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