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Are African Stock Markets Integrated with the Rest of the World?

Author

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  • Paul Alagidede

    (University of Stirling)

Abstract

This paper examined equity market integration within the emerging and frontier stock markets of south and east Africa, and the rest of the world. Using maximum likelihood based cointegration we showed that there are weak stochastic trends between African markets and world markets. With the exception of South Africa and Mauritius, African markets are not integrated regionally either. However, analysis of the short run dynamics indicates that size and extent of financial market development drives equity market interdependence, with South Africa accounting for most of the innovations to and, from global markets. Importantly, our results indicate that while diversification potential exists in Africa’s emerging exchanges, the scope of deepening the structural relations both regionally, and with the rest of the world should be of concern to policy makers.

Suggested Citation

  • Paul Alagidede, 2009. "Are African Stock Markets Integrated with the Rest of the World?," The African Finance Journal, Africagrowth Institute, vol. 11(1), pages 37-53.
    • Handle: RePEc:afj:journl:v:11:y:2009:i:1:p:37-53
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    Citations

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    Cited by:

    1. Nir Kshetri, 2011. "Institutional And Economic Foundations Of Entrepreneurship In Africa: An Overview," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 16(01), pages 9-35.
    2. Mensah, Jones Odei & Alagidede, Paul, 2017. "How are Africa's emerging stock markets related to advanced markets? Evidence from copulas," Economic Modelling, Elsevier, vol. 60(C), pages 1-10.
    3. Guney, Yilmaz & Kallinterakis, Vasileios & Komba, Gabriel, 2017. "Herding in frontier markets: Evidence from African stock exchanges," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 47(C), pages 152-175.
    4. Adam, Anokye M. & Tweneboah, George, 2008. "Macroeconomic Factors and Stock Market Movement: Evidence from Ghana," MPRA Paper 11256, University Library of Munich, Germany.
    5. Todd Moss and Ross Thuotte, 2013. "Nowhere Left to Hide? Stock Market Correlation, Regional Diversification, and the Case for Investing in Africa," Working Papers 316, Center for Global Development.
    6. Izunna Anyikwa & Micheal Brookes & Pierre Le Roux, 2018. "African stock markets integration: an analysis of the relationship between major stock markets in Africa," Working Papers 1812, Department of Economics, Nelson Mandela University, revised Mar 2018.
    7. Bello, Jaliyyah & Guo, Jiaqi & Newaz, Mohammad Khaleq, 2022. "Financial contagion effects of major crises in African stock markets," International Review of Financial Analysis, Elsevier, vol. 82(C).
    8. Mbengue, Mohamed Lamine & Ndiaye, Bara & Sy, Oumar, 2023. "Which factors explain African stock returns?," Finance Research Letters, Elsevier, vol. 54(C).
    9. Boamah, Nicholas Addai & Watts, Edward J. & Loudon, Geoffrey, 2016. "Investigating temporal variation in the global and regional integration of African stock markets," Journal of Multinational Financial Management, Elsevier, vol. 36(C), pages 103-118.
    10. Tinashe H. D. Kambadza & Zivanemoyo Chinzara, 2012. "Returns Correlation Structure and Volatility Spillovers Among the Major African Stock Markets," Working Papers 305, Economic Research Southern Africa.
    11. Boamah, Nicholas Addai & Watts, Edward J. & Loudon, Geoffrey, 2017. "Financial crisis, the real sector and global effects on the African stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 88-96.
    12. Kingstone Nyakurukwa & Yudhvir Seetharam, 2023. "Stock market integration in Africa: Further evidence from an information‐theoretic framework," International Finance, Wiley Blackwell, vol. 26(1), pages 2-18, April.
    13. Alagidede, Paul, 2011. "Return behaviour in Africa's emerging equity markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(2), pages 133-140, May.

    More about this item

    Keywords

    Equity Market Integration; Cointegration; Portfolio Diversification and African Stock Markets;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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