A Test of the Law of One Price: An Examination of Price Integration between Europe and Regional Markets in Africa

Kings College London Department of Management Research Paper No. 46

26 Pages Posted: 18 Jan 2009 Last revised: 25 Aug 2009

See all articles by Jenifer Piesse

Jenifer Piesse

University of Stellbosch; King's College London - Department of Management

Bruce Allen Hearn

University of Southampton

Date Written: January 17, 2009

Abstract

This study examines the degree of price-integration of equity index assets between the major markets of Africa, namely Morocco, Tunisia, Egypt, Kenya, Nigeria, Namibia and South Africa with the prominent European markets of London and Paris. The application of Vector Autoregressive and Autoregressive Distributed Lag methods reveals that African markets are largely price-segmented. The only markets that are price-integrated have shared economic and financial institutions such as Namibia and South Africa, and Egypt, Tunisia and France. The evidence suggests that development policy should be focussed on enhancing existing institutions rather than embarking prematurely on regional integration

Keywords: Financial market Integration, causality, Sub Saharan Africa

JEL Classification: C22, G15, O16

Suggested Citation

Piesse, Jenifer and Hearn, Bruce Allen, A Test of the Law of One Price: An Examination of Price Integration between Europe and Regional Markets in Africa (January 17, 2009). Kings College London Department of Management Research Paper No. 46. Available at SSRN: https://ssrn.com/abstract=1329309 or http://dx.doi.org/10.2139/ssrn.1329309

Jenifer Piesse

University of Stellbosch

Stellenbosch, Western Cape
South Africa

King's College London - Department of Management ( email )

Virginia Woolf Building
22 Kingsway
London, England WC2B 6NR
United Kingdom

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
113
Abstract Views
685
rank
252,958
PlumX Metrics