Crisis Periods, Contagion and Integration Effects in the Major African Equity Markets During the 2007-2009 Global Financial Crisis

Abstract

SummaryA number of studies assert that during critical events cross-market correlations change substantially. The main focus of this paper is to explicitly test two research hypotheses concerning the effect of increasing cross-market correlations in the 2007-2009 Global Financial Crisis (GFC) compared to the pre-crisis period. These hypotheses state that there was no contagion and no integration effects among the U.S., the U.K., and selected African stock markets (South Africa, Namibia, Egypt, Nigeria, Morocco and Kenya) during the GFC. The crisis periods are formally detected using a statistical method of dividing market states into bullish and bearish markets. The sample period begins in January 2003 and ends in December 2013, and it includes the 2007 U.S. subprime crisis. Obtained results indicate that there is no reason to reject both research hypotheses. Moreover, the results confirm a heterogeneity of the African equity markets in the context of the influence of the recent global crisis.

Spillovers in Sub-Saharan Africa’s Sovereign Eurobond Yields

“…degree of isolation among them. This heterogeneity of African equity markets has also been confirmed by the results ofLabuschagne et al (2016) in the context of the 2007-2009 financial crisis. Moreover, the latter study fails to reject the hypothesis of no contagion and no integration effects among the U.S., the U.K., and selected African stock markets (South Africa, Namibia, Egypt, Nigeria, Morocco and Kenya) during the global financial crisis of 2007-2009 Guney et al (2017).…”

“…So far, only a few studies have investigated the interconnectedness of African security markets. Some of the few available studies on this topic have focused on the spillovers of economic growth and financial market shocks from developed and emerging markets to African economies (see Gurara and Ncube, 2013;Labuschagne et al, 2016). Others have investigated the level of economic and financial integration among African countries through the contagion of shocks to domestic economic growth and stock markets (World Bank, 2016;Collins and Biekpe, 2003).…”

Returns, Political Developments and Economic Forces: A Historical Perspective on the Johannesburg Stock Exchange (Jse): 2010 - 2020

“…The FTSE/JSE All-share index (ALSI) improved by 50% (almost 60% on a total return index basis) from 2009 till the end of 2010, tracking similar movements in international equity markets and higher commodity prices. During these first few years after the GFC, non-resident investors also returned to South African markets as sentiment and risk appetite improved (Labuschagne et al, 2016). As a result, the total value of equity capital raised during 2009 by JSE-listed companies, although raised mainly by the resources and financial sectors, amounted to R107 billion -40% higher than in 2008 (SARB, 2011).…”