Empirical Regularities of Nigeria’s Foreign Private Portfolio Investment Return and Volatility

Peters Omeni Ihejirika

doi:10.14738/abr.511.3791

Abstract

ABSTRACT This paper examined the Empirical Regularities of Nigeria’s Foreign Private Portfolio Investment Return and Volatility. The study covered the periods between 1981 and 2014. An EGARCH model was specified. The analysis involves carrying out the tests for Financial Assets and Risk assumptions. The study revealed that Foreign Private Portfolio Investment Returns show Volatility clustering. Secondly, Foreign Private Portfolio Investment Return and Risk were found to have Thick tail. Variance Ratio Test [VRT] was used to test the weak form efficiency of the efficient market hypothesis and hence the non-predictability of financial markets. The Results showed that changes in one direction are more often followed by similar changes in either direction (volatility clustering). Given that Nigeria’s Foreign Private portfolio investment empirical imperatives is regular like that of the rest of the world, the paper thus recommends that investment decision models used by advanced analyst in developed countries can be applied to developing countries like Nigeria with little modification with respect to Foreign Private Portfolio Investment as their assets and risks display similar characteristics with assets and risks in developed countries.

Highlights

This paper examined the Empirical Regularities of Nigeria’s Foreign Private Portfolio Investment Return and Volatility
The data were sourced from a previous paper titled “Principal Component analysis of Nigeria’s Foreign Private Portfolio Investment (FPPI) volatility” (Ndugbu et al, 2017)
OF FINDINGS The study revealed that Returns show Volatility clustering

Summary

Introduction

This paper examined the Empirical Regularities of Nigeria’s Foreign Private Portfolio Investment Return and Volatility. The study revealed that Foreign Private Portfolio Investment Returns show Volatility clustering. Their study examined Foreign Investment Explicit Volatility and Volatility Theories and revealed that Foreign Private Portfolio Investment volatility proxy by ten key risks factors can be de – parameterized to Six (6) Principal components using the Kaiser’s criterion and Cattell’s scree test. These six components were selected as they were heavily affected by factors which are not common to all the other risks. Official flow refers to different forms of developmental assistance to a developed or developing nation given by donor countries

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Discussion

Conclusion