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Global commodities and African stocks: A ‘market of one?’

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  • Boako, Gideon
  • Alagidede, Paul

Abstract

Owing to frequent fluctuations in global markets, diversifying across emerging markets is increasingly becoming a necessity. Despite this, a cloud of uncertainty surrounds the relative capacities of emerging markets to provide the required shields for international investors, especially during extreme market conditions. In this paper, we explore the relative potentials of African equities to provide opportunities for hedging and diversification for global commodity investors by using data of daily periodicity on close-to-close basis from January 3, 2003 to December 29, 2014. The findings indicate the presence of non-linear relationships between some African stocks and returns on global commodities. Thus, global commodity market investors react differently towards investment potentials in African stocks during tranquil and crisis periods. Additionally, from the mean–variance stand-point, we observe that including African equities in a diversified portfolio has the effect of lowering risk whiles simultaneously increasing expected returns. However, any such investment strategies may have to be informed by volatility persistence, as well as past and present market conditions.

Suggested Citation

  • Boako, Gideon & Alagidede, Paul, 2016. "Global commodities and African stocks: A ‘market of one?’," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 226-237.
  • Handle: RePEc:eee:finana:v:44:y:2016:i:c:p:226-237
    DOI: 10.1016/j.irfa.2016.02.009
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:reveco:v:58:y:2018:i:c:p:282-298 is not listed on IDEAS
    2. repec:eee:riibaf:v:46:y:2018:i:c:p:166-180 is not listed on IDEAS
    3. Boako, Gideon & Alagidede, Paul, 2016. "African stock markets convergence: Regional and global analysis," Finance Research Letters, Elsevier, vol. 18(C), pages 317-321.
    4. repec:eee:jrpoli:v:53:y:2017:i:c:p:88-102 is not listed on IDEAS

    More about this item

    Keywords

    African stocks; Global commodities; Diversification; Mean–variance; Hedging;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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