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Modelling stock returns in Africa’s emerging equity markets

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Author Info
Paul Alagidede () (Department of Economics, University of Stirling)
Theodore Panagiotidis () (Department of Economics, University of Macedonia)

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Abstract

We investigate the behaviour of stock returns in Africa’s largest markets namely, Egypt, Kenya, Morocco, Nigeria, South Africa, Tunisia and Zimbabwe. The validity of the random walk hypothesis is examined and rejected by employing a battery of tests. Secondly we employ smooth transition and conditional volatility models to uncover the dynamics of the first two moments and examine weak from efficiency. The empirical stylized facts of volatility clustering, leptokurtosis and leverage effect are present in the African data. .

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Publisher Info
Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number 2009_01.

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Date of creation: Jan 2009
Date of revision: Jan 2009
Handle: RePEc:mcd:mcddps:2009_01

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Web page: http://econlab.uom.gr/econdep/
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Related research
Keywords: Stock Returns; Weak Form Efficiency; Asymmetric Volatility and African Stock Markets.;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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    Other versions:
  2. Lim, Kian-Ping & Brooks, Robert D. & Kim, Jae H., 2008. "Financial crisis and stock market efficiency: Empirical evidence from Asian countries," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 571-591, June. [Downloadable!] (restricted)
  3. Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-78, December. [Downloadable!] (restricted)
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  4. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May. [Downloadable!] (restricted)
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  6. Dick van Dijk & Timo Teräsvirta & Philip Hans Franses, 2002. "Smooth Transition Autoregressive Models - A Survey Of Recent Developments," Econometric Reviews, Taylor and Francis Journals, vol. 21(1), pages 1-47. [Downloadable!] (restricted)
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  7. Appiah-Kusi, Joe & Menyah, Kojo, 2003. "Return predictability in African stock markets," Review of Financial Economics, Elsevier, vol. 12(3), pages 247-270. [Downloadable!] (restricted)
  8. Keith Jefferis & Graham Smith, 2005. "The Changing Efficiency Of African Stock Markets," South African Journal of Economics, Economic Society of South Africa, vol. 73(1), pages 54-67, 03. [Downloadable!] (restricted)
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    Other versions:
  11. Caprio, Gerard, Jr & Demirguc-Kunt, Asli, 1998. "The Role of Long-Term Finance: Theory and Evidence," World Bank Research Observer, Oxford University Press, vol. 13(2), pages 171-89, August. [Downloadable!]
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  12. Lundbergh, Stefan & Terasvirta, Timo, 2002. "Evaluating GARCH models," Journal of Econometrics, Elsevier, vol. 110(2), pages 417-435, October. [Downloadable!] (restricted)
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  13. Conrad, Jennifer & Kaul, Gautam, 1988. "Time-Variation in Expected Returns," Journal of Business, University of Chicago Press, vol. 61(4), pages 409-25, October. [Downloadable!] (restricted)
  14. W. A. Broock & J. A. Scheinkman & W. D. Dechert & B. LeBaron, 1996. "A test for independence based on the correlation dimension," Econometric Reviews, Taylor and Francis Journals, vol. 15(3), pages 197-235. [Downloadable!] (restricted)
  15. Ashley, Richard A. & Patterson, Douglas M., 2006. "Evaluating the Effectiveness of State-Switching Time Series Models for U.S. Real Output," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 266-277, July. [Downloadable!] (restricted)
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  18. Brooks, Chris & Heravi, Saeed M, 1999. "The Effect of (Mis-Specified) GARCH Filters on the Finite Sample Distribution of the BDS Test," Computational Economics, Springer, vol. 13(2), pages 147-62, April. [Downloadable!]
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