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Interdependence among West African stock markets: A dimension of regional financial integration

Interdependence among West African stock markets: A dimension of regional financial integration Understanding the nature of interdependence between international stock markets is vital for portfolio diversification, risk management and market regulation. This paper examines the nature of interdependence among West African stock markets using correlation analysis, the Granger causality test and a multivariate BEKK‐GARCH (1,1) model. The results show evidence of a weak relationship among West African stock markets. The results also show absence of causal dependence between the Côte d'Ivoire BRVM (Bourse Régionale des Valeurs Mobilières), and the Ghana stock market, but evince feedback relationship between the Côte d'Ivoire BRVM and the Nigeria stock market as well as between the Ghana and Nigeria stock markets. The results further reveal no evidence of volatility spillover between the Côte d'Ivoire BRVM and the Ghana stock market, but show evidence of unidirectional volatility spillover from the Nigeria stock market to the Côte d'Ivoire BRVM as well as bidirectional volatility spillover between the Nigerian and Ghanaian stock markets. Overall, the findings reveal existence of weak interdependence among West African stock markets, and that West African financial markets are interdependent through the Nigerian market. These findings are relevant to stock market stabilisation and investment policy in West Africa. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png African Development Review Wiley

Interdependence among West African stock markets: A dimension of regional financial integration

Emenike, Kalu O.
African Development Review , Volume 33 (2) – Jun 1, 2021
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References (29)

Publisher
Wiley
Copyright
© 2021 African Development Bank
ISSN
1017-6772
eISSN
1467-8268
DOI
10.1111/1467-8268.12575
Publisher site
See Article on Publisher Site

Abstract

Understanding the nature of interdependence between international stock markets is vital for portfolio diversification, risk management and market regulation. This paper examines the nature of interdependence among West African stock markets using correlation analysis, the Granger causality test and a multivariate BEKK‐GARCH (1,1) model. The results show evidence of a weak relationship among West African stock markets. The results also show absence of causal dependence between the Côte d'Ivoire BRVM (Bourse Régionale des Valeurs Mobilières), and the Ghana stock market, but evince feedback relationship between the Côte d'Ivoire BRVM and the Nigeria stock market as well as between the Ghana and Nigeria stock markets. The results further reveal no evidence of volatility spillover between the Côte d'Ivoire BRVM and the Ghana stock market, but show evidence of unidirectional volatility spillover from the Nigeria stock market to the Côte d'Ivoire BRVM as well as bidirectional volatility spillover between the Nigerian and Ghanaian stock markets. Overall, the findings reveal existence of weak interdependence among West African stock markets, and that West African financial markets are interdependent through the Nigerian market. These findings are relevant to stock market stabilisation and investment policy in West Africa.

Journal

African Development Review – Wiley

Published: Jun 1, 2021

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