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Integration of African Stock Markets with the Developed Stock Markets: An Analysis of Co-Movements, Volatility and Contagion

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  • Izunna Anyikwa
  • Pierre Le Roux

Abstract

This paper investigates evidence of integration and contagion between major African stock markets (ASMs) and developed stock markets during the periods of global financial crisis (GFC) and Eurozone sovereign debt crisis (ESDC). Specifically, it examined whether the co-movement between ASMs and developed stock markets during the two crisis periods is related to their level of financial integration or due to contagion. The study finds limited evidence of integration between ASMs and developed markets. However, the analysis of dynamic correlations shows that the conditional correlations are typically positive and higher during the periods of crisis, indicating substantial evidence of contagion. These findings suggest that the observed co-movements between stock markets during the crises were mainly due to contagion. The findings of this paper have several implications with respect to financial market stability, portfolio diversification and policy interventions.

Suggested Citation

  • Izunna Anyikwa & Pierre Le Roux, 2020. "Integration of African Stock Markets with the Developed Stock Markets: An Analysis of Co-Movements, Volatility and Contagion," International Economic Journal, Taylor & Francis Journals, vol. 34(2), pages 279-296, April.
    • Handle: RePEc:taf:intecj:v:34:y:2020:i:2:p:279-296
    DOI: 10.1080/10168737.2020.1755715
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    Cited by:

    1. Adeabah, David & Abakah, Emmanuel Joel Aikins & Tiwari, Aviral Kumar & Hammoudeh, Shawkat, 2023. "How far have we come and where should we go after 30+ years of research on Africa's emerging financial markets? A systematic review and a bibliometric network analysis," Emerging Markets Review, Elsevier, vol. 55(C).
    2. Urom, Christian & Ndubuisi, Gideon & Del Lo, Gaye & Yuni, Denis, 2023. "Global commodity and equity markets spillovers to Africa during the COVID-19 pandemic," Emerging Markets Review, Elsevier, vol. 55(C).
    3. Abubakar Jamaladeen & David E. Omoregie & Samuel F. Onipede & Nafiu A. Bashir, 2022. "A regime-switching skew-normal model of contagion in some selected stock markets," SN Business & Economics, Springer, vol. 2(12), pages 1-20, December.
    4. Bossman, Ahmed & Umar, Zaghum & Agyei, Samuel Kwaku & Teplova, Tamara, 2023. "The impact of the US yield curve on sub-Saharan African equities," Finance Research Letters, Elsevier, vol. 53(C).
    5. Artem Stopochkin & Inessa Sytnik & Janusz Wielki & Nataliia Zemlianska, 2021. "Methodology for Building Trader's Investment Strategy Based on Assessment of the Market Value of the Company," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 913-935.
    6. Agyei, Samuel Kwaku & Umar, Zaghum & Bossman, Ahmed & Teplova, Tamara, 2023. "Dynamic connectedness between global commodity sectors, news sentiment, and sub-Saharan African equities," Emerging Markets Review, Elsevier, vol. 56(C).
    7. Bossman, Ahmed & Agyei, Samuel Kwaku, 2022. "Interdependence structure of global commodity classes and African equity markets: A vector wavelet coherence analysis," Resources Policy, Elsevier, vol. 79(C).

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