Stock market returns and volatility in the BRVM

Abstract

This paper studies the relationship between expected stock market returns and volatility in the regional stock market of the West African Economic and Monetary Union called the BRVM. Using weekly returns over the period 4 January 1999 to 29 July 2005 and, an EGARCH-in-Mean model assuming normally distributed and Student's t distribution for error terms, the study reveals that: 1) expected stock return has a positive but not statistically significant relationship with expected volatility. 2) volatility is higher during market booms than when market declines.   Key words: Regional stock market, BRVM, WAEMU, EGARCH-M, Risk-returns tradeoff