Stock market integration in Africa | Zendy

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Stock market integration in Africa

Author(s) -

Sam AgyeiAmpomah

Publication year - 2011

Publication title -

managerial finance

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.271

H-Index - 39

eISSN - 1758-7743

pISSN - 0307-4358

DOI - 10.1108/03074351111113306

Subject(s) - volatility (finance) , emerging markets , stock market index , stock market , economics , stock (firearms) , financial economics , diversification (marketing strategy) , liberalization , international economics , business , market economy , finance , geography , context (archaeology) , archaeology , marketing

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.

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