Interdependence structure of global commodity classes and African equity markets: A vector wavelet coherence analysis

Ahmed Bossman and Samuel Kwaku Agyei

Resources Policy, 2022, vol. 79, issue C

Abstract: Commodity and African stock markets are capable of producing safe returns when needed. However, the high commodity price volatility coupled with commodity financialisation suggests that the fundamental characteristics of commodity returns may change. The probable situation with commodity returns is no different from those of equity returns from Africa, owing to the new trade liberalisations between African markets which signal plausible high cross-market integration. These developments could render diversification extinct and warrant that timely assessments are made to ascertain the dynamic interdependencies between these markets. Using the vector wavelet coherence approach, we examine the multiple, quadruple, and n-dimensional interdependencies between the returns on global commodities and African equity markets. Our findings from a time-frequency paradigm divulge dynamic interdependence between the various commodities and equity returns from Africa. We report high interdependence in the short-term with the degree being commodity-dependent. Our analysis – which covers commodities from energies, precious metals, grains, and softs – produces findings that have significant implications for market regulation, asset allocation, and portfolio management.

Keywords: Commodity classes; African equity markets; Interdependence; Market integration; Diversification; Vector wavelet coherence (search for similar items in EconPapers)
JEL-codes: C58 N27 Q02 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:79:y:2022:i:c:s0301420722004822

DOI: 10.1016/j.resourpol.2022.103039

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