Abstract
In the last few years, international institutions stressed the role of African financial markets to diversify investors’ risk. Focusing on the volatility of financial markets, this paper analyses the relationships between developed markets (US, UK and China) and some Sub-Saharian African (SSA) emerging markets (Kenya, Nigeria and South Africa) in the period 2004–2009 using a Multiplicative Error model (MEM). We model the dynamics of the volatility in one market including interactions from other markets, and we build a fully interdependent model. Results show that South Africa and China have a key role in all African markets, while the influence of the UK and the US is weaker. Developments in China turn out to be (fairly) independent of both UK and US markets. With the help of impulse-response functions, we show how recent turmoil hit African countries, increasing the fragility of their infant financial markets.
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© 2011 Springer-Verlag Berlin Heidelberg
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Giovannetti, G., Velucchi, M. (2011). A MEM Analysis of African Financial Markets. In: Ingrassia, S., Rocci, R., Vichi, M. (eds) New Perspectives in Statistical Modeling and Data Analysis. Studies in Classification, Data Analysis, and Knowledge Organization. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-11363-5_36
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DOI: https://doi.org/10.1007/978-3-642-11363-5_36
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