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Cointegration of Stock Prices and Domestic Portfolio Diversification Opportunities: Evidence from the Ghana Stock Exchange

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  • George Amfo-Antiri
  • Edward Quansah

Abstract

This paper employed Engle-Granger test of cointegration and the Bound Test to explore potential domestic portfolio diversification opportunities that are available for individual investors, institutional and other portfolio managers from constructing domestic portfolios. Daily stock prices for the period 1st August, 2011 to July 29th, 2016 have been employed as well as monthly stock return from the Ghana Stock exchange. The result from the cointegration analysis indicated that most equity stocks listed on the Ghana Stock Exchange are not cointegrated with each other in the long run. In addition, majority of the stock returns are statistically insensitive to the GSE¨C Composite index during the period under consideration. The empirical evidence indicates that domestic investors can benefit from constructing portfolios that consist of equities from the financial sector and other non-financial sectors which are not cointegrated.

Suggested Citation

  • George Amfo-Antiri & Edward Quansah, 2017. "Cointegration of Stock Prices and Domestic Portfolio Diversification Opportunities: Evidence from the Ghana Stock Exchange," Applied Economics and Finance, Redfame publishing, vol. 4(5), pages 78-93, September.
    • Handle: RePEc:rfa:aefjnl:v:4:y:2017:i:5:p:78-93
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    References listed on IDEAS

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    More about this item

    Keywords

    cointegration; domestic portfolio; diversification; stock prices; beta; financial stocks;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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