Impact of News on Volatility of Nigeria's Crude Oil Prices Using Asymmetric Models with Error Distribution Assumptions

Abstract

This study investigates the asymmetrical volatility of crude oil prices in Nigeria using error distribution assumptions from 1982 to 2023. The study materials are from the National Bureau of Statistics (NBS) data repository. Asymmetric generalized autoregressive conditional heteroscedasticity models, such as EGARCH, PGARCH, and TGARCH, were used to investigate the leverage effect under the assumption of error distributions. After assessing many models, we determined that the PGARCH (1,1) was the best depiction of asymmetry and leverage in Nigerian crude oil price returns, assuming a normal error distribution. The serial correlation LM test and the stability diagnostic check both proved the model's resilience. The PGARCH model with normal error distribution is a valuable tool for risk management and portfolio optimization in the Nigerian crude oil market since it considers the leverage effect, heteroscedasticity, and responsiveness to news or shocks at different volatility levels.