Investigating Daily Naira/Dollar Exchange Rate Volatility: A Modeling using GARCH and Asymmetric Models

  • Musa Y
  • Abubakar B
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Abstract

Exchange rates are important financial problem that is receiving attention globally. This study investigated the volatility of daily Dollar/Naira exchange rate using GARCH (1, 1), GJR-GARCH (1, 1), TGARCH (1, 1) and TS-GARCH (1, 1) models by using daily data over the period June 1st, 2000 to July 26, 2011 consisting of 4083 observations. The results from all the models show that volatility was persistent (i.e. exceed 1) indicating GARCH (1, 1), GJR-GARCH (1, 1), and TS-GARCH (1, 1) models variances are not stationary but for TGARCH (1, 1) model (i.e. below 1) indicating the variance is stationary. The GJR-GARCH (1, 1) and TGARCH (1, 1) models show the existence of statistically significant asymmetry effect. The results from all the asymmetry models rejected the hypothesis of leverage effect. The TGARCH (1, 1) and TS-GARCH (1, 1) models are found to be the best models, they have all the parameters of the variance being significant and with lower information criteria

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APA

Musa, Y., & Abubakar, B. (2014). Investigating Daily Naira/Dollar Exchange Rate Volatility: A Modeling using GARCH and Asymmetric Models. IOSR Journal of Mathematics, 10(2), 139–148. https://doi.org/10.9790/5728-1022139148

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