Financial Contagion Effect and Investor Behavior in African Financial Markets During the 2007–09 Global Financial Crisis

33 Pages Posted: 29 Aug 2019 Last revised: 25 Aug 2020

Date Written: August 25, 2019

Abstract

This paper examines contagion effect on 10 African financial markets. These markets can be considered risky as they carry additional political and economic risks. They are also a lot less integrated with the US as depicted in financial integration literature. A consequence of this is that African financial markets, generally have much lower correlations with the US market. The distinguishing characteristic of the 2007-09 crisis is its long nature characterised by a series of sub-shocks. The insight that this paper gives is that, a multiple-event crisis that consists of a series of shocks, leads us to examine contagion as a series of events. Using correlation coefficient analysis, evidence of contagion is found in different crisis periods which mostly disappeared following the adjustment for heteroscedasticity bias. Our results do point to investors’ herding behaviour as the main driving force for contagion in our sample.

Keywords: financial, contagion, herding, African, markets

Suggested Citation

Bello, Jaliyyah, Financial Contagion Effect and Investor Behavior in African Financial Markets During the 2007–09 Global Financial Crisis (August 25, 2019). Available at SSRN: https://ssrn.com/abstract=3442636 or http://dx.doi.org/10.2139/ssrn.3442636

Jaliyyah Bello (Contact Author)

Coventry University ( email )

Priory Street
Coventry, CV1 5FB
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
89
Abstract Views
612
Rank
426,400
PlumX Metrics