Stock market volatility and macroeconomic performance in the Nigerian economy

This thesis seeks to investigate the impact of stock market volatility on macroeconomic variables, specifically on real GDP and inflation, in Nigeria using quarterly time series data from 1985Q1-2012Q4. To achieve this, the study establishes two equations: real GDP and inflation equations, and splits the analysis into two parts. In the first part, the study employs four volatility models: ARCH, GARCH, EGARCH and TGARCH models, and compares them based on both model selection criterion and forecast performance in order to choose among them the fittest model to All Share Index (ASI) series (which is used as a proxy of the Nigerian stock market index). The TGARCH model was then selected as the best model, and therefore, the Nigerian stock market volatility series were extracted from it. In the second part, the thesis applies Bounds test co-integration approach and ARDL model. The results from the Bounds test analysis suggest the existence of co-integration relationship between the Nigerian stock market volatility and macroeconomic variables. While, the results from the ARDL model indicate that the stock market volatility has no any significant effect on the real GDP in both long-run and short-run and on the inflation in the long-run in Nigeria. However, the results also show that in the short-run, the Nigerian stock market volatility has significant positive impact on inflation. Keywords: Stock Market Volatility, Real GDP equation, Inflation equation, ARCH Family Models, Bounds tests, ARDL Model