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

Yakubu Musa, Bello Abubakar
2014 IOSR Journal of Mathematics  
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 1 st , 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) , 1) , and TS-GARCH (1, 1) models variances are
more » ... t 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.
doi:10.9790/5728-1022139148 fatcat:7n5her46i5adzpdgrvw74a5pai