Assessing the Forecast Performance of EGARCH and Prophet Models in Analyzing the Effect of Holidays/Events on Nigeria Stock Price Returns under Normal and GED Assumptions of Innovations

Abstract

Stock market price returns are greatly affected either positively or negatively by so many factors such as day-of-the-week, holidays/events (Childrens day, Valentine’s Day, Id el Kabir, Maulud, Christmas day, Eve day among others). And the effect of such factors on Nigeria Stock market was little or not been assessed and quantified. This paper aimed at studying the effects of holidays/events on the Nigeria Stock market price returns utilizing EGARCH and Prophet models under Normal and Generalized Error Distribution (GED) assumptions of innovations. The results of EGARCH model under Normal assumption of innovations revealed that the holidays that falls on Mondays and Fridays has significant effects on the NSE returns; but the effects are not significant on the other days. Similarly, the results of the Prophet model revealed that all the effect of holidays that falls on Mondays down to Fridays are not significant. On the other hand, the EGARCH model (under GED assumption of innovations) and Prophet model agreed equally as all the holidays effects are not significant in both the cases. With the help of MAE, RMSE, and MASE, EGARCH with GED assumptions of innovations performed better than EGARCH with Normal assumptions of innovations as well as the Prophet model. 

Keywords—EGARCH, Facebook prophet, holidays/events effects, GED, NSE.