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…
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.
Details
Keywords
Howard Thomas, Michelle Lee, Lynne Thomas and Alexander Wilson
Ebere Ume Kalu, Augustine Chuck Arize, Sylvester Okechukwu Ilo, Ifeoma Ihegboro and Chiamaka Goodness Eze
This study investigated the interactive impact of global and domestic stock market variables on the depth of the financial system in Sub-Saharan African (SSA) countries from 1990…
Abstract
Purpose
This study investigated the interactive impact of global and domestic stock market variables on the depth of the financial system in Sub-Saharan African (SSA) countries from 1990 to 2018.
Design/methodology/approach
The study used the mean group and pooled mean group estimators for the dynamic heterogeneous panel.
Findings
The results provide strong statistical evidence that the depth of the financial system in SSA countries is influenced by a combination of local and international stock market indicators. While the local variables exert a positive influence, the global indicator tends to negatively affect the depth of the system, particularly the monetization ratio.
Practical implications
While the tendency of portfolio adjustments and reversal can be inferred, the study stresses the need for a more globalized approach to financial policy formulation and implementation even as the trend of global financializaton gets more robust and more profound.
Originality/value
This study is unique in that, unlike prior ones, it has extended the debate on the role of the stock market in financial deepening from a domestic to an international dimension. Financial policy making can be aided by the authors' findings through looking at the financial deepening-stock market linkage from both domestic and globalized perspectives.