The Performance of African Stock Markets Before and After the Global Financial Crisis

Part of the Advances in African Economic, Social and Political Development book series (AAESPD)


The empirical evidence shows that, in comparison to Industrialized, Asian and Latin American countries, African stock markets recorded the best performance in a mean-variance space before the crisis, January 2000 to December 2007, with the highest average monthly returns and levels of total risk (standard deviation of returns) that equaled the score of Industrialized countries and were significantly lower than for Asian and Latin American stock markets. Their average systematic risk (Beta relative to the S&P 500) was significantly lower than that of their counterparts in other regions. However, during the crisis, January 2008 to February 2015, they recorded the sharpest declines among regions in their average returns and an increase in their total and systematic risk. Their average Sharpe and Treynor ratios, and their Jensen’s Alpha also underscored significant deterioration of their performance between the pre-crisis and the crisis period and ranked them from the best investment destination to the poorest one for a US-based investor. Results also show that African stock markets were prime candidates for inclusion in the equity portfolio of US-based investors seeking international diversification before the crisis, a situation that was reversed during the crisis for African countries and other regions alike. Weak recovery of African stock markets is documented by the inability of most of them to return to their pre-crisis index levels and the lower average returns that they have recorded since the peak of the global financial crisis.


African stock markets International portfolio diversification Stock market co-movement Financial contagion Global financial crisis 

JEL classification

F3 G1 O1 


  1. Bacon CR (2008) Practical portfolio performance measurement and attribution, 2nd edn. Wiley, ChichesterGoogle Scholar
  2. Barucci E (2003) Financial markets theory; equilibrium, efficiency and information. Springer Finance Textbook, London, 467 pCrossRefGoogle Scholar
  3. Breeden D (1979) An intertemporal asset pricing model with stochastic consumption and investment opportunities. J Financ Econ 7:265–296CrossRefGoogle Scholar
  4. Duncan AS, Kabundi A (2014) Global financial crises and time-varying volatility co-movement in world equity markets. S Afr J Econ 82(4):531–550CrossRefGoogle Scholar
  5. Elton EJ, Gruber MJ, Brown SJ, Goetzmann WN (2007) Modern portfolio theory and investment analysis, 7th edn. Wiley, HobokenGoogle Scholar
  6. Feibel JB (2016) Investment performance measurement, 2nd edn. Wiley, New YorkGoogle Scholar
  7. Gibbons M, Ross S, Shanken J (1989) A test of the efficiency of a given portfolio. Econometrica 57:1121–1152CrossRefGoogle Scholar
  8. Hegerty SW (2013) Exchange market pressure, stock prices, and commodity prices in West Africa. Int Rev Appl Econ 27(6):750–765CrossRefGoogle Scholar
  9. Jensen M (1968) The performance of mutual funds in the period 1945–1964. J Financ 23(2):380–415CrossRefGoogle Scholar
  10. Jobson JD (1981) Performance hypothesis testing with the Sharpe and Treynor measures. J Financ 36(4):888–908CrossRefGoogle Scholar
  11. Lintner J (1965) Security prices, risk, and maximum gains from diversification. J Financ 20(4):587–615Google Scholar
  12. Lo AW (2002) The statistics of Sharpe ratios. Financ Anal J 58(4):36–52CrossRefGoogle Scholar
  13. Maghyereh AI, Awartani B, Hilu K (2015) Dynamic transmissions between the U.S. and equity markets in the MENA countries: new evidence from pre and post-global financial crisis. Q Rev Econ Financ 56:123–138CrossRefGoogle Scholar
  14. Markovitz H (1952) Portfolio selection. J Financ 7:77–91Google Scholar
  15. Merton R (1973) An intertemporal capital asset pricing model. Econometrica 41(5):867–888CrossRefGoogle Scholar
  16. Modigliani F (1997) Risk-adjusted performance. J Portf Manag 23(2):45–54CrossRefGoogle Scholar
  17. Mossin J (1966) Equilibrium in a capital asset market. Econometrika 34(October):768–783CrossRefGoogle Scholar
  18. Ntsosa M (2011) The impact of 2007 global financial crisis on Botswana economy. Asian-Afr J Econ Econometrics 11(1):45–63Google Scholar
  19. Ross SA (1976) The arbitrage theory of capital asset prices. J Econ Theory 13(December):341–360CrossRefGoogle Scholar
  20. Roy AD (1952) Safety first and the holding of assets. Econometrica 20:431–449CrossRefGoogle Scholar
  21. Sharpe WF (1964) Capital asset prices: a theory of market equilibrium under conditions of risk. J Financ 19(3):425–442Google Scholar
  22. Sharpe WF (1966) Mutual fund performance. J Bus 39(1):119–138CrossRefGoogle Scholar
  23. Sharpe W (1994) The Sharpe ratio. J Portf Manag 21(1):49–58CrossRefGoogle Scholar
  24. Sortino FA, van der Meer R (1991) Downside Risk. J Portf Manag 17(4):27–31CrossRefGoogle Scholar
  25. Sugimoto K, Matsuki T, Yoshida Y (2014) The global financial crisis: an analysis of the spillover effects on African stock markets. Emerg Mark Rev 21(Dec):201–233CrossRefGoogle Scholar
  26. Tella S, Yinusa OG, Olusola AT (2011) Global economic crisis and stock market efficiency: evidence from selected African countries. Bogazici J Rev Soc Econ Admin Stud 25(1):139–169Google Scholar
  27. Treynor J (1965) How to rate management of investment funds. Harv Bus Rev 43(1):63–75Google Scholar
  28. Wang Z, Bessler DA (2003) Financial crisis and African stock market integration. Appl Econ Lett 10(9):527–533CrossRefGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2017

Authors and Affiliations

  1. 1.CREPOL—Center for Research on Political EconomyDakar YoffSenegal

Personalised recommendations