Modelling Volatility and the Risk-Return Relationship of some Stocks on the Ghana Stock Exchange

摘要

The volatility and the risk-return trade off of stocks or stock markets play essential role in investment decision making, financial stability among others. This paper modelled the volatility and the risk-return relationship of some stocks on the Ghana Stock Exchange using univariate GARCH-M (1,1) models with three distributional assumptions namely, the student-t, GED and Gaussian distributions. The results showed that, the market was bullish for investors of most of the stocks and that there was a high probability of gains than losses. All the stocks were extremely volatile. The results also indicated the existence of positive risk premium meaning investors were compensated for holding risky assets. The results also showed that, the asymmetry models gave a better fit than the symmetry model indicating the presence of leverage effect among the selected stocks. The TGARCH-M (1, 1) model with the student-t distribution was the appropriate model selected.