Modeling the correlation of assets returns volatilities across different markets or segments of a
market has practical value for portfolio selection and diversification, market regulation, and risk
management. This paper therefore evaluates the nature of time-varying correlation between volatilities
of stock market and crude oil returns in Nigeria using Dynamic Conditional Correlation-Generalised
Autoregressive Conditional Heteroscedasticity (DCC-GARCH) model. Results from DCCGARCH
(1,1) model show evidence of volatility clustering and persistence in Nigeria stock market
and crude oil returns. The results also show that there is no dynamic conditional correlation in ARCH
effects between stock market returns and crude oil prices in Nigeria. The results further show that
there is strong evidence of time-varying volatility correlation between stock market and crude oil
returns volatility. The findings will help shape policy-making in risk management and market regulation
in Nigeria.
