Evaluating Nigeria Exchange Group All Share Index: Insights from Linear and GARCH Modeling Techniques

Dorathy N. Ugwu; Sidney Onyeagu; Okechukwu Obulezi

doi:10.64060/JASR.v1i3.6

Authors

Dorathy N. Ugwu Department of Statistics, Faculty of Physical Sciences, Chukwuma Odumegwu Ojukwu University, Igbariam, Anambra State, Nigeria Author https://orcid.org/0009-0003-0057-133X
Sidney I. Onyeagu Department of Statistics, Faculty of Physical Sciences, Nnamdi Azikiwe University, P.O. Box 5025 Awka, Nigeria. Author https://orcid.org/0009-0005-0244-4419
Okechukwu Obulezi Department of Statistics, Nnamdi Azikiwe University, P.O. Box 5025 Awka, Nigeria Author https://orcid.org/0000-0002-7753-1868

DOI:

https://doi.org/10.64060/JASR.v1i3.6

Keywords:

All Share Index, GARCH Modeling, Linear Regression, Nigerian Exchange Group, Stock Market Volatility, Time Series Analysis

Abstract

This study investigates the volatility of the Nigeria Exchange Group All Share Index (ASI) using linear regression and Generalized Autoregressive Conditional Heteroskedasticity (GARCH) modeling techniques. Despite prevalent public concerns regarding stock market instability, our analysis reveals that these perceptions are often exaggerated, driven largely by historical price levels and media representation. We employed a linear regression model to analyze monthly historical ASI data from 1985 to 2023, establishing a significant positive relationship between time and ASI values, with an R² value of 0.7493, indicating that approximately 75% of the variance in ASI can be explained by the model. The Breusch-Godfrey test highlighted significant serial correlation in the residuals, necessitating further analysis using GARCH models to account for time-varying volatility. Our findings suggest that traditional asset pricing models may overlook alter- native risk measures that investors prioritize, emphasizing the need for a more nuanced understanding of market behavior. The adequacy of the model is achieved with a p-value 0.000017. Overall, this study contributes to the existing literature by offering insights into the dynamics of the Nigerian stock market and its volatility patterns, which are crucial for investors and policymakers alike.

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