IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Financial liberalization, structural breaks and stock market volatility: evidence from South Africa

  • Umar Bida Ndako

This article examines the effect of financial liberalization on South African equity markets using Exponential Generalized Autoregressive Conditional Heteroscedastic (EGARCH) models. It utilises daily data and specifically, it analyses whether volatility persistence increased following financial liberalization. To achieve this objective, the study starts with endogenous structural break tests using Bai and Perron (2003) Ordinary Least Square (OLS)‐type test and the Cumulative Sum (CUSUM)‐type test of Inclan and Tiao (1994) and Sanso et al . (2004) respectively. These breaks are performed both in the stock returns and in the conditional variance over pre‐ and post‐liberalization periods. The significant break points identified through algorithm are incorporated into EGARCH models and to obtain the effect of financial liberalization, the study further adds liberalization dummy using official liberalization dates. The findings show that none of the estimated break dates coincide with the official liberalization dates. The analysis further shows that after taking structural breaks into account volatility declines following financial liberalization. Also using official liberalization dates, the results indicate that the effect of financial liberalization on the stock markets is negative and statistically significant.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 22 (2012)
Issue (Month): 15 (August)
Pages: 1259-1273

in new window

Handle: RePEc:taf:apfiec:v:22:y:2012:i:15:p:1259-1273
Contact details of provider: Web page:

Order Information: Web:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:22:y:2012:i:15:p:1259-1273. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.