Abstract:

Volatility is increasingly becoming a measure of risk in finance. More studies are examining volatility of stock market indexes. The GARCH in Mean model is able to model the relationship between volatility as a measure of risk, and the returns of a series. This study models the risk-return relationship that exists in stock markets in the West African region through the univariate GARCH in mean methodology. Daily index data for two frontier markets in the region from 2011-2016 are analysed to assess their risk-return relationship. Findings of the study has implications for portfolio managers, institutional investors as well as individual investors, bring to light if higher risk portends higher returns in the selected markets.