STOCK MARKET VOLATILITY AND NON-PERFORMING
LOANS: EVIDENCE FROM STOCKS OF THE
NIGERIAN BANKS

 

Sayo Oludare, Michael Olagunju and Olusegun Adelodun
Obafemi Awolowo University

 

ABSTRACT

This study examined the empirical relationship between stock market volatility and non-performing loans (NPL) of banks using the Exponential Generalized Autoregressive Heteroscedasticity (EGARCH) model. Taking into account the excess kurtosis in high frequency data, it estimated EGARCH model using generalized error distributions (GED). Results indicated a positive relationship between stock volatility and NPL. In addition, we found evidence to support an adverse asymmetric reaction with negative shock, on the average, increasing volatility more than the positive.