Modelling Size and Illiquidity in West African Equity Markets
41 Pages Posted: 13 Feb 2009 Last revised: 21 Nov 2009
Date Written: February 12, 2009
Abstract
This paper assesses the effectiveness of traded turnover and Amihud (2002) constructs in measuring illiquidity which is used in constructing a multifactor CAPM. The performance of this model is contrasted against GARCH and simple stochastic drift models on a unique sample of five West African equity markets: BRVM, Ghana, Nigeria, Morocco and Tunisia together with London and Paris. Analysis of portfolio characteristics reveal that investment strategies centred on Francophone markets outperform those of Anglophone markets despite their lower mean returns. There is some evidence of limited benefits to investors from inclusion of the very small and highly illiquid BRVM and Ghanaian markets.
Keywords: Liquidity, Emerging Financial Markets, Sub-Saharan Africa, West Africa
JEL Classification: G11, G12, G15, O55
Suggested Citation: Suggested Citation
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