An empirical analysis of stock market interdependence and volatility spillover in the stock markets of Africa and Middle East region

Ajaya Kumar Panda, Swagatika Nanda and Rashmi Ranjan Paital

African Journal of Economic and Management Studies, 2019, vol. 10, issue 3, 314-335

Abstract: Purpose - The purpose of this paper is to examine the short-term and long-term interdependence among the stock markets of Africa and Middle East region. It also attempts to analyze the pattern of volatility spillover among the regional stock markets. Design/methodology/approach - The study has used Granger causality test, variance decomposition test of vector auto-regression (VAR) model, vector error correction model (VECM), multivariate generalized conditional heteroskedasticity (MGARCH-BEKK) models and Johansen and Juselius multivariate cointegration techniques. Findings - The study finds that the interlinkages of the stock markets are not uniform across all the countries of the region. The stock market of Israel, South Africa and Jordan are found to be highly connected stock market of the region followed by Egypt and Botswana. The study also finds significant spillover of lagged standardized volatility across the stock markets of the region. But the magnitude of the response of volatility spillover and its persistence is very minimum. However, the stock markets are found to be co-integrated and expected to share long-run equilibrium relationships among each other. Research limitations/implications - The study has the scope to be extended to capture the time-varying integration of market returns with transmission of monetary policy and exchange rate changes within the region. The results obtained from this study may assist the firm managers and international investors to understand the key drivers of market connectedness. Originality/value - Empirically investigating the pattern of stock market connectedness in Africa and Middle East region with advanced methodology over a long study period is the originality of this study.

Keywords: Co-integration; Stock market interdependence; Volatility spillover; VAR; VECM (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-10-2018-0293

DOI: 10.1108/AJEMS-10-2018-0293

Access Statistics for this article

African Journal of Economic and Management Studies is currently edited by Prof John Kuada

More articles in African Journal of Economic and Management Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().