Asymmetries in the African financial markets

Abstract

We investigate the asymmetries in the African financial markets; both stock and exchanges markets, namely Botswana, Egypt, Kenya, Mauritius and South Africa. The dataset begins on January 1, 2001 and ends on January 20, 2018, for a total of 4479 trading days. We apply an asymmetric threshold approach with an error-correction model with four dummy variables for both positive/negative and small/large news. Our findings reveal that the foreign exchange markets in Africa are statistically more prone to larger-scale news. We also found a direct reaction to short-term positive/negative stock market news after the global financial crisis. Furthermore, we investigate the total effects of South African economic news releases with an Asymmetric Power Arch model. Our findings suggest substantial discrepancy, which belong to the Southern African Development Community and Common Market for Eastern and Southern Africa free trade area. SADC stock markets are strongly affected by the economic news releases from South Africa.