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Stock market integration in Africa

Author

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  • Sam Agyei-Ampomah

Abstract

Purpose - The purpose of this paper is to examine the nature and extent of linkages between African stock markets and the relationships between these markets and that of regional and global indices. Design/methodology/approach - The monthly returns of S&P/IFC return indices for ten African countries over the period 1998-2007 were analyzed. The index return volatility was decomposed into three components following Barari and the contributions of regional and global market movements to the local index volatility were estimated. Findings - It was found that African stock markets are still segmented from global markets in spite of recent structural adjustments and that the local index volatility is largely country-specific, which can be diversified away by cross-country diversification. Originality/value - This paper provides further evidence on stock market integration in emerging markets. The finding suggests that African stock markets, with the exception of South Africa, are still segmented from global markets. Thus, recent structural adjustment and liberalisation policies have not reduced stock market segmentation in Africa. This paper therefore has implications for policy makers and international investors.

Suggested Citation

  • Sam Agyei-Ampomah, 2011. "Stock market integration in Africa," Managerial Finance, Emerald Group Publishing, vol. 37(3), pages 242-256, February.
  • Handle: RePEc:eme:mfipps:v:37:y:2011:i:3:p:242-256
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Izunna Anyikwa & Micheal Brookes & Pierre Le Roux, 2018. "African stock markets integration: an analysis of the relationship between major stock markets in Africa," Working Papers 1812, Department of Economics, Nelson Mandela University, revised Mar 2018.
    2. Boamah, Nicholas Addai & Watts, Edward J. & Loudon, Geoffrey, 2016. "Investigating temporal variation in the global and regional integration of African stock markets," Journal of Multinational Financial Management, Elsevier, vol. 36(C), pages 103-118.
    3. repec:dug:actaec:y:2017:i:6:p:313-322 is not listed on IDEAS
    4. Abdullahi, Shafiu Ibrahim, 2017. "Stock Market Linkage, Financial Contagion and Assets Price Movements: Evidence from Nigerian Stock Exchange," MPRA Paper 83455, University Library of Munich, Germany, revised Nov 2017.
    5. Boamah, Nicholas Addai, 2017. "The dynamics of the relative global sector effects and contagion in emerging markets equity returns," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 433-453.
    6. Boamah, Nicholas Addai & Loudon, Geoffrey & Watts, Edward J., 2017. "Structural breaks in the relative importance of country and industry factors in African stock returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 79-88.
    7. repec:eee:riibaf:v:45:y:2018:i:c:p:54-61 is not listed on IDEAS
    8. Sugimoto, Kimiko & Matsuki, Takashi & Yoshida, Yushi, 2014. "The global financial crisis: An analysis of the spillover effects on African stock markets," Emerging Markets Review, Elsevier, vol. 21(C), pages 201-233.
    9. Aklilu Gebrehiwot & Mustafa Sayim, 2015. "Financial Market Integration: Empirical Evidence from the COMESA," Business and Economic Research, Macrothink Institute, vol. 5(2), pages 242-255, December.
    10. repec:eee:quaeco:v:65:y:2017:i:c:p:88-96 is not listed on IDEAS

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