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The law of one price: An examination of price integration between Europe and regional markets in Africa

The law of one price: An examination of price integration between Europe and regional markets in Africa
The law of one price: An examination of price integration between Europe and regional markets in Africa

This study examines the degree of price-integration of equity indices between the major markets of Africa, namely Morocco, Tunisia, Egypt, Kenya, Nigeria, Namibia and South Africa with the European markets of London and Paris. Vector Autoregressive and Autoregressive Distributed Lag methods reveal 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.

Causality, Financial market integration, Sub-Saharan Africa
0003-6846
3169-3193
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Hearn, Bruce Allen
45dccea3-9631-4e5e-914c-385896674dc2
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Hearn, Bruce Allen
45dccea3-9631-4e5e-914c-385896674dc2

Piesse, Jenifer and Hearn, Bruce Allen (2011) The law of one price: An examination of price integration between Europe and regional markets in Africa. Applied Economics, 44 (24), 3169-3193. (doi:10.1080/00036846.2011.570722).

Record type: Article

Abstract

This study examines the degree of price-integration of equity indices between the major markets of Africa, namely Morocco, Tunisia, Egypt, Kenya, Nigeria, Namibia and South Africa with the European markets of London and Paris. Vector Autoregressive and Autoregressive Distributed Lag methods reveal 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.

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More information

e-pub ahead of print date: 24 June 2011
Published date: August 2011
Keywords: Causality, Financial market integration, Sub-Saharan Africa

Identifiers

Local EPrints ID: 423329
URI: http://eprints.soton.ac.uk/id/eprint/423329
ISSN: 0003-6846
PURE UUID: 90d1e387-9a76-4898-ae5e-96336ec9b2ae
ORCID for Bruce Allen Hearn: ORCID iD orcid.org/0000-0001-9767-0198

Catalogue record

Date deposited: 20 Sep 2018 16:30
Last modified: 15 Aug 2019 00:22

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