Open AccessCointegration of Stock Prices and Domestic Portfolio Diversification Opportunities: Evidence from the Ghana Stock Exchange
Author(s) -
George Amfo-Antiri,
Edward Quansah
Publication year - 2017
Publication title -
applied economics and finance
Language(s) - English
Resource type - Journals
eISSN - 2332-7308
pISSN - 2332-7294
DOI - 10.11114/aef.v4i5.2475
Subject(s) - cointegration , stock exchange , economics , stock (firearms) , financial economics , equity (law) , diversification (marketing strategy) , portfolio , monetary economics , econometrics , business , finance , geography , marketing , political science , law , archaeology
This paper employed Engle-Granger test of cointegration and the Bound Test to explore potential domestic portfolio diversification opportunities that are available for individual investors, institutional and other portfolio managers from constructing domestic portfolios. Daily stock prices for the period 1st August, 2011 to July 29th, 2016 have been employed as well as monthly stock return from the Ghana Stock exchange. The result from the cointegration analysis indicated that most equity stocks listed on the Ghana Stock Exchange are not cointegrated with each other in the long run. In addition, majority of the stock returns are statistically insensitive to the GSE– Composite index during the period under consideration. The empirical evidence indicates that domestic investors can benefit from constructing portfolios that consist of equities from the financial sector and other non-financial sectors which are not cointegrated.