Returns Correlation Structure and Volatility Spillovers Among the Major African Stock Markets
AbstractThe paper analyses the structure of returns comovements and the volatility spillovers among the African stock markets using daily data for the period 2000-2010. We particularly focus on two issues: whether the stock markets of countries with close trading and financial links are more sychronised, and whether the financial crises influences volatility spillovers. Econometric models used include the Factor Analysis (FA), the Vector Autoregressive (VAR) and the GARCH. Our findings suggest that linkages among the African stock markets only exist along regional blocs. South Africa is found to be both the most dominant and most endogenous stock market. Most of the markets exhibit evidence of asymmetry and persistence in volatility. The results also show that it is important to account for structural change in volatility during financial crises when modelling volatility. We outline the investment and policy implications of the findings.
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Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 305.
Length: 33 pages
Date of creation: 2012
Date of revision:
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Returns and volatility linkages; Factor Analysis (FA); Vector Autoregressive (VAR); Financial Stability; asymmetric GARCH.;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-AFR-2012-08-23 (Africa)
- NEP-ALL-2012-08-23 (All new papers)
- NEP-FMK-2012-08-23 (Financial Markets)
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