Are Cryptocurrencies and African stock markets integrated?

Seyram Pearl Kumah and Jones Odei-Mensah ()

The Quarterly Review of Economics and Finance, 2021, vol. 81, issue C, 330-341

Abstract: The finance literature provides evidence that the cryptocurrency market is integrating with other markets. This may induce increased investor participation with the chance of excessive liquidity in the cryptocurrency market, which can impair financial stability should there be shocks to the cryptocurrency market. This provides grounds to uncover the degree of integration between cryptocurrencies and African stock markets, which has been completely untouched using wavelet-based methods and frequency domain spillover index. Such knowledge is critical since shocks to the cryptocurrency market may have rippling effects on African stock markets. Findings suggest low degrees of integration between the markets at higher frequencies, which grows stronger at medium frequencies and perfectly integrates at lower frequencies. The implication is that stock markets in Africa are highly exposed to cryptocurrency market disruptions from the medium-term, and international investors seeking to hedge their price risk in African stock markets using cryptocurrencies may have to look at the short term. We find cryptocurrencies as significant spillover transmitters across frequencies. The lead (lag) effects are time-varying and heterogeneous, showing no particular market as a leader, suggesting arbitrage opportunities for investors.

Keywords: Cryptocurrency; African stock markets; Integration; Wavelet coherency; Spillover effect (search for similar items in EconPapers)
JEL-codes: C22 G11 G15 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:81:y:2021:i:c:p:330-341

DOI: 10.1016/j.qref.2021.06.022

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