VOLATILITY TRANSMISSION AND CO-MOVEMENT BETWEEN NIGERIAN AND UNITED STATES OF AMERICAN BOND MARKETS

Safiya Bichi, Reuben Oluwabukunmi David

Abstract


The issue of co-movement and spillover among international bond markets is very important in asset allocation management and investors' diversification strategies. This paper examines the co-movement between the Nigerian and United States (US) bond markets by adapting a class of conditional correlation of the Multivariate Generalize Autoregressive Conditional Heteroscedasticity (MGARCH) framework, the Dynamic Conditional Correlation (DCC) model. The result of this study reveals a weak negative relationship between the Nigerian and US bond markets and concluded that the correlation will in time return to the long-run unconditional level, due to evidence of mean reverting. Finally, these findings are informative to both investors and policy makers working or investing in the Nigerian bond and capital markets. As a result, there is need to identify the specific factors that generate the co-movement in the bonds of the two markets.


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