n African Finance Journal - Are African stock markets integrated with the rest of the world?
|Article Title||Are African stock markets integrated with the rest of the world?|
|© Publisher:||AfricaGrowth Institute|
|Journal||African Finance Journal|
|Publication Date||Jan 2009|
|Pages||37 - 53|
|Keyword(s)||C22, C52, Cointegration, Equity market integration, G10 and Portfolio diversification and African Stock Markets|
This paper examined equity market integration within the emerging and frontier stock markets of south and east Africa, and the rest of the world. Using maximum likelihood based cointegration we showed that there are weak stochastic trends between African markets and world markets. With the exception of South Africa and Mauritius, African markets are not integrated regionally either. However, analysis of the short run dynamics indicates that size and extent of financial market development drives equity market interdependence, with South Africa accounting for most of the innovations to and, from global markets. Importantly, our results indicate that while diversification potential exists in Africa's emerging exchanges, the scope of deepening the structural relations both regionally, and with the rest of the world should be of concern to policy makers.
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