Return and volatility spillovers between oil and stock markets in South Africa and Nigeria

Babajide Fowowe

African Journal of Economic and Management Studies, 2017, vol. 8, issue 4, 484-497

Abstract: Purpose - The purpose of this paper is to empirically examine return and volatility spillovers between oil and the stock markets of Nigeria and South Africa. Design/methodology/approach - The authors make use of an innovative new methodology of capturing spillovers, which is different from what many existing studies use. The authors employ the measures of return spillovers and volatility spillovers of Diebold and Yilmaz (2009, 2012), referred to as spillover indexes. The spillover index facilitates an assessment of the net contribution of one market in the information transmission mechanism of another market. Findings - The empirical results show bi-directional, but weak interdependence between the South African and Nigerian stock markets returns and oil market returns. The results for volatility spillovers show independence of volatilities between Nigeria stock markets and oil markets, while weak bi-directional spillovers were found between South African equity volatilities and oil volatilities. The time-varying total spillover plots for returns and volatilities are broadly similar and show a trend that has been observed in other studies: an increasing trend during the non-crisis period, a burst in the crisis year, a maintained higher level of transmission afterwards. Originality/value - Existing studies examining spillovers between oil and stock markets have largely ignored Sub-Saharan African markets. A common feature of existing studies is that they have been conducted for two groups of countries: either European and US markets; or Gulf Cooperation Council markets Thus, this study fills this gap in the literature by examining return and volatility spillovers between oil and the stock markets of Nigeria and South Africa.

Keywords: Variance decomposition; Stock returns; Volatility; Spillovers (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-03-2017-0047

DOI: 10.1108/AJEMS-03-2017-0047

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