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Why a diversified portfolio should include African assets

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  • Paul Alagidede
  • Theodore Panagiotidis
  • Xu Zhang

Abstract

We employ parametric and nonparametric cointegration approaches to investigate the extent of integration between African stock markets and the rest of the world. Long-run correlation estimates imply very low association between these two. The two distinct cointegration approaches confirm the latter through recursive estimation. The implication is that global markets have little impact on African stock markets. However, including African assets in a mean-variance portfolio would be beneficial to international investors.

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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/13504851.2010.537617&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 18 (2011)
Issue (Month): 14 ()
Pages: 1333-1340

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Handle: RePEc:taf:apeclt:v:18:y:2011:i:14:p:1333-1340

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  1. Jurgen A. Doornik, 1998. "Approximations To The Asymptotic Distributions Of Cointegration Tests," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 573-593, December.
  2. Søren Johansen, 2007. "Correlation, Regression, and Cointegration of Nonstationary Economic Time Series," Discussion Papers 07-25, University of Copenhagen. Department of Economics.
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  4. Singh, Ajit, 1998. "Should Africa Promote Stock Market Capitalism?," MPRA Paper 51846, University Library of Munich, Germany.
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  6. Bracker, Kevin & Docking, Diane Scott & Koch, Paul D., 1999. "Economic determinants of evolution in international stock market integration," Journal of Empirical Finance, Elsevier, vol. 6(1), pages 1-27, January.
  7. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc.
  8. Pedro H. Albuquerque, 2005. "Optimal Time Interval Selection in Long-Run Correlation Estimation," Econometrics 0511017, EconWPA, revised 27 Nov 2005.
  9. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  10. Steven B. Kamin, 1999. "The current international financial crisis: how much is new?," International Finance Discussion Papers 636, Board of Governors of the Federal Reserve System (U.S.).
  11. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  12. Kim, E Han & Singal, Vijay, 2000. "Erratum [Stock Market Openings: Experience of Emerging Economies]," The Journal of Business, University of Chicago Press, vol. 73(4), pages na, October.
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  14. Breitung, Jorg, 2002. "Nonparametric tests for unit roots and cointegration," Journal of Econometrics, Elsevier, vol. 108(2), pages 343-363, June.
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