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Why African Stock Markets Should Formally Harmonise and Integrate their Operations

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  • Ntim, Collins G

Abstract

Despite experiencing rapid growth in their number and size, existing evidence suggests that African stock markets remain highly fragmented, small, illiquid and technologically weak, severely affecting their informational efficiency. Therefore, this study attempts to empirically ascertain whether African stock markets can improve their informational efficiency by formally harmonising and integrating their operations. Employing parametric and non-parametric variance-ratios tests on 8 African continent-wide and 8 individual national daily share price indices from 1995 to 2011, we find that irrespective of the test employed, the returns of all the 8 African continent-wide indices investigated appear to have better normal distribution properties compared with the 8 individual national share price indices examined. We also report evidence of statistically significant weak form informational efficiency of the African continent-wide share price indices over the individual national share price indices irrespective of the test statistic used. Our results imply that formal harmonisation and integration of African stock markets may improve their informational efficiency.

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  • Ntim, Collins G, 2012. "Why African Stock Markets Should Formally Harmonise and Integrate their Operations," MPRA Paper 45806, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:45806
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    References listed on IDEAS

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    1. Jorge Belaire-Franch & Kwaku Opong, 2005. "A Variance Ratio Test of the Behaviour of Some FTSE Equity Indices Using Ranks and Signs," Review of Quantitative Finance and Accounting, Springer, vol. 24(1), pages 93-107, January.
    2. Appiah-Kusi, Joe & Menyah, Kojo, 2003. "Return predictability in African stock markets," Review of Financial Economics, Elsevier, vol. 12(3), pages 247-270.
    3. Claessens, Stijn & Dasgupta, Susmita & Glen, Jack, 1995. "Return Behavior in Emerging Stock Markets," The World Bank Economic Review, World Bank, vol. 9(1), pages 131-151, January.
    4. Ayadi, O. Felix & Pyun, C. S., 1994. "An application of variance ratio test to the Korean securities market," Journal of Banking & Finance, Elsevier, vol. 18(4), pages 643-658, September.
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    Cited by:

    1. Kalima, Bwalya & Gopane, Thabo, 2022. "Portfolio performance under dynamic systematic risk and conditional betas: The South African unit trust market," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 66, pages 85-98.
    2. Kyriazopoulos Georgios & Sariannidis Nikolaos & Parpoutzidou Androniki, 2020. "Evaluation of the main African Stock Exchanges Markets for Foreign Direct Investments. A Statistical Approach," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(5), pages 1-13.
    3. King, Daniel & Botha, Ferdi, 2015. "Modelling stock return volatility dynamics in selected African markets," Economic Modelling, Elsevier, vol. 45(C), pages 50-73.
    4. Maud Korley & Evangelos Giouvris, 2021. "The Regime-Switching Behaviour of Exchange Rates and Frontier Stock Market Prices in Sub-Saharan Africa," JRFM, MDPI, vol. 14(3), pages 1-30, March.
    5. Gourène, Grakolet Arnold Zamereith & Mendy, Pierre & Ake N'gbo, Gilbert Marie, 2017. "Multiple time-xcales analysis of global stock markets spillovers effects in African stock markets," MPRA Paper 77632, University Library of Munich, Germany.
    6. Boako, Gideon & Alagidede, Paul, 2017. "Co-movement of Africa’s equity markets: Regional and global analysis in the frequency–time domains," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 468(C), pages 359-380.
    7. Tosin B. Fateye & Oluwaseun D. Ajay & Cyril A. Ajay, 2021. "Modelling of Daily Price Volatility of South Africa Property Stock Market Using GARCH Analysis," AfRES 2021-013, African Real Estate Society (AfRES).
    8. Tweneboah, George & Owusu Junior, Peterson & Kumah, Seyram Pearl, 2020. "Modelling the asymmetric linkages between spot gold prices and African stocks," Research in International Business and Finance, Elsevier, vol. 54(C).
    9. Ntim, Collins G. & English, John & Nwachukwu, Jacinta & Wang, Yan, 2015. "On the efficiency of the global gold markets," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 218-236.
    10. 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.
    11. Boako, Gideon & Alagidede, Paul, 2018. "African stock markets in the midst of the global financial crisis: Recoupling or decoupling?," Research in International Business and Finance, Elsevier, vol. 46(C), pages 166-180.
    12. Boako, Gideon & Alagidede, Paul, 2016. "African stock markets convergence: Regional and global analysis," Finance Research Letters, Elsevier, vol. 18(C), pages 317-321.
    13. Alagidede, Paul & Baah-Boateng, William & Nketiah-Amponsah, Edward, 2013. "The Ghanian economy: and Overview," MPRA Paper 109687, University Library of Munich, Germany.

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    More about this item

    Keywords

    Harmonisation and integration; Efficiency; Share price indices; Stock markets; Africa;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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