All Markets are not Created Equal - Evidence from the Ghana Stock Exchange

Abstract

We investigated the model fit for volatility of returns from the Ghana Stock Exchange All Share Index for the Bayesian versions of GARCH(1,1) with student-t innovations and stochastic volatility. We found evidence in favour of the GARCH(1,1) with student-t innovations against the recommendation from the developed equity markets of preference for stochastic volatility models. We are of the view that model fit has to do with the development stage of a particular market. Issues like thin and asynchronous trading influence the data generating process; hence, we view financial econometric models as suitable to data depending on whether the market is developed, emerging or frontier.