Shock and Spillover Effects of Global Commodity Markets on Some African Equity Markets

29 Pages Posted: 12 Mar 2021 Last revised: 21 Sep 2021

See all articles by Ernest Owusu Boakye

Ernest Owusu Boakye

Jyväskylä University School of Business and Economics

Date Written: January 20, 2021

Abstract

A decade after the 2008–2009 global recession, the world’s financial architecture has developed into an integrated network of financial and commodity markets, mainly due to cross-border investments and trade. In light of this, shock spillovers have also intensified as the interdependence between equity and commodity markets increased after the global financial crisis (GFC). This paper investigates the dynamic shock and spillover effects of international commodity markets on some African equity markets using VAR-GARCH and DCC-GARCH approaches. The first moment equation show no equity return predictability in the African equity markets, which support the main ideas of the efficient-market hypothesis (EMH). But the second moment equations reveal a statistically significant risk and shock spillovers from the international commodity markets on African equity markets as well as spillover effects from the global implied volatility indicators. In addition, we find a is strong indication that the risk effects are time-varying and that they become stronger when the market risks increase, particularly during and after the global financial crisis (GFC). Overall, the findings reveal that the intensive financialization of commodity markets has had a clear role in the spreading of commodity market risks to African equity markets.

Keywords: commodity prices, volatility spillover, Africa, equity market returns, dynamic conditional correlation

JEL Classification: C32, G12, G15, Q43

Suggested Citation

Boakye, Ernest Owusu, Shock and Spillover Effects of Global Commodity Markets on Some African Equity Markets (January 20, 2021). Available at SSRN: https://ssrn.com/abstract=3770342 or http://dx.doi.org/10.2139/ssrn.3770342

Ernest Owusu Boakye (Contact Author)

Jyväskylä University School of Business and Economics ( email )

University of Jyväskylä
PO Box 35
FIN 40351, FIN-40014
Finland
+358 406541230 (Phone)
00750 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
52
Abstract Views
325
Rank
648,944
PlumX Metrics