Sovereign Bond Volatility versus Stock Volatility: Evidence from Ghana
William Mawuli K. Adjimah, Charles Nsiah, Felix Obeng Boateng

Abstract
In this paper, we examine return volatility in the sovereign domestic/foreign bond and stock markets in Ghana using ratios, correlation, ARCH/GARCH family models. The study considered daily returns covering periods from 1st May 2009 - 31st July 2018. We find that even though the bond market volatility has increased relatively over time, it is less volatile as compared to the stocks. More so, bonds are still an effective diversification medium as a result of nonexistence of trend in the correlation between bond and stock and the ratio of the bond to the stock. We show that the trend in volatility for Ghana Domestic Bond (GDB) and stock markets are negatively significant. Furthermore, we document that the ARCH model can be used to predict future values in the domestic bond return series. However, it cannot be used to predict future values in the Ghana Foreign Bond (GFB) and Stock daily return series.

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