Commodity-driven integration of stock markets in Africa. Issue 11 (25th June 2017)

• Record Type: Journal Article
• Authors: Peltomäki, Jarkko; Graham, Michael; Alagidede, Paul
• Is Part Of: Applied economics letters. Volume 24:Issue 11(2017)
• Page Start: 784
• Page End: 789
• Publication Date: 2017-06-25
• Subjects: Commodities -- stock market integration -- Africa -- diversification; G10 -- G11 -- G15; Economics -- Periodicals; Economics, Mathematical -- Periodicals; 330
• DOI: 10.1080/13504851.2016.1229402
• Languages: English
• ISSNs: 1350-4851

Abstract

ABSTRACT: This article examines stock market integration for commodity-dependent African countries. The analysis is carried out in two phases – first we adjust the respective national equity returns for changes in commodity prices and examine integration in the context of commodity-adjusted stock returns, and second we focus on integration associated with changes in commodity prices in a novel modelling framework. The results for this unexamined area of research are interesting: (a) African stock markets are not driven by more than one common component and (b) commodity-adjusted integration is significantly lower than nonadjusted integration. We discuss the implications of the results for index construction, modelling and diversification in the conclusions.