Forecasting of the Nigeria Stock Returns Volatility Using GARCH Models with Structural Breaks

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Yakubu Musa
Ibrahim Adamu
Nasiru Sani Dauran


This study examines the stock returns series using Symmetric and Asymmetric GARCH models with structural breaks in the presence of some varying distribution assumptions. Volatility models of Symmetric GARCH (1,1), Asymmetric Power GARCH (1,1) and GJR-GARCH(1,1) models were considered in estimating and measuring shock persistence,  leverage effects and mean reversion rate with structural breaks considering dummy variable  for these structural changes and varying distributions . The skewed student-t distribution is considered best distribution for the models; moreover findings showed the high persistence of shock in returns series for the estimated models. However, when structural breaks were incorporated in the estimated models by including dummy variable in the conditional variance equations of all the models, there was significant reduction of shock persistence parameter and mean reversion rate.  The study found the GJR-GARCH (1,1) with skewed student-t distribution best fit the series. The volatility was forecasted for 12 months period using GJR-GARCH (1,1) model and the values are compared with the actual values and the results indicates a continuous increase in unconditional variance.

Volatility, GARCH, structural breaks, Nigeria.

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How to Cite
Musa, Y., Adamu, I., & Sani Dauran, N. (2020). Forecasting of the Nigeria Stock Returns Volatility Using GARCH Models with Structural Breaks. Asian Research Journal of Mathematics, 16(2), 39-50.
Original Research Article


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