The Risk-Return Relationship in the Nigerian Stock Market in the Presence of Structural Break.
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Date
2018
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Publisher
Faculty of Management Sciences, University of Ilorin.
Abstract
This study estimated the risk-return relationship in the Nigerian stock market between January 2000 and December 2016 while taking into account the presence of structural break. The structural break period identified by the Bai-Perron breakpoint test is March 2008, hence the overall sample period is divided into the before-break period and after-break period. This study adopted the Generalized Autoregressive Conditional Heteroskedasticity-in mean (GARCH-M) model estimated with the Maximum Likelihood estimation method. It found that the risk-return relationship is not statistically significant in the before-break period while it is negative and statistically significant in the after-break period. In the overall period, risk is not significantly related to return. This study concluded that risk-return relationship in the Nigerian stock market is sensitive to structural break. Therefore, there may be need to account for structural break when determining the risk-return relationship.
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Keywords
Risk-return Relationship, Structural Break, Capital Asset Pricing Model, GARCH-M Model, Nigerian Stock Market
Citation
6. Aluko, O. A. & Abogun, S. (2018): The Risk-Return Relationship in the Nigerian Stock Market in the Presence of Structural Break. Ilorin Journal of Management Sciences. 5 (1); 61-74, Published by Faculty of Management Sciences, University of Ilorin.