APPLICATION OF EGARCH MODELS TO NIGERIA INSURANCE STOCKS

Abstract

This study used EGARCH model to analyze insurance stock in Nigeria. The data used in the study are daily insurance stocks obtained from Nigeria Stock Exchange for a period of 1961 – 2019. The analysis done in this study were conducted in R-environment using Rugarch package by Ghalanos. Four competing EGARCH models such as EGARCH (1,1), EGARCH (1,2), EGARCH (2,1) and EGARCH (2,2) with student t’s distribution  and student skewed t’s distribution were considered. However, the model made used of necessary parameters, half life and persistence to undertake the study. Model selection was based on Akaike information – criterion (AIC). Although all the models were fit because their respective values of persistence do not exceed one. In terms of performance for the distributions EGARCH (1,1) supercede the rest models with all the parameters significant. It becomes pertinent that in modeling financial time series of insurance stocks EGARCH Models should be adopted to be able to obtain an optimum result.