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Stock market connectedness during an energy crisis: Evidence from South Africa

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  • Lawrence, Babatunde
  • Obalade, Adefemi A.
  • Tita, Anthanasius F.
  • French, Joseph J.

Abstract

This study examines the within-industry and global volatility connectivity of the South African equity market during a major domestic energy crisis (load-shedding) and the COVID-19 pandemic. Using a time-varying parameter vector autoregressive model, we identify distinct patterns in volatility spillovers across periods of global and domestic crises. The onset of the COVID-19 pandemic increased interconnectedness between South Africa and global equity markets. In contrast, during domestic load-shedding, the Johannesburg Stock Exchange (JSE) became detached from international markets, highlighting the localized impact of this crisis. We find that the financial and energy industries are consistently net receivers and transmitters of shocks during both crises which demonstrate their systemic importance to South Africa. Our findings provide insights into the dynamic nature of volatility connectedness, with implications for risk management and policy formulation in Africa.

Suggested Citation

  • Lawrence, Babatunde & Obalade, Adefemi A. & Tita, Anthanasius F. & French, Joseph J., 2024. "Stock market connectedness during an energy crisis: Evidence from South Africa," Emerging Markets Review, Elsevier, vol. 63(C).
  • Handle: RePEc:eee:ememar:v:63:y:2024:i:c:s156601412400089x
    DOI: 10.1016/j.ememar.2024.101194
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    Cited by:

    1. Marina Yu. Malkina, 2024. "Financial contagion in the US, European and Chinese stock markets during global shocks," Journal of New Economy, Ural State University of Economics, vol. 25(4), pages 47-67, December.

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    More about this item

    Keywords

    Load-shedding; Connectedness; Africa equity markets; Spillovers;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G01 - Financial Economics - - General - - - Financial Crises
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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