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A reassessment of stock market integration in SADC: the case of Namibia

A reassessment of stock market integration in SADC: the case of Namibia
A reassessment of stock market integration in SADC: the case of Namibia
The New Economic Partnership for Africa’s Development focuses on the benefits to integration of many smaller African markets with South Africa as the central hub motivated by a wish to attract foreign investment and increase liquidity. However, little attention has been paid to issues regarding migration of liquidity and loss of the price discovery mechanism in a integrated union where one market dominates. This paper reviews this policy using the example of Namibia, which is the first market to be fully integrated with South Africa. Several established liquidity constructs are compared to determine their ability to explain the bid-ask spread plus a newly introduced measure of the proportion of daily zero returns which captures the dynamics of the price discovery process and traders’ ability to trade on informational grounds that is found to be more appropriate in highly illiquid frontier markets such as Namibia. Finally there is evidence that liquidity (and illiquidity) is closely linked to the rule of law and control of corruption institutional quality measures, while the price-discovery process and hence trader participation in markets is highly sensitive to the control of corruption, political stability and regulatory quality.
University of Namibia
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97

Hearn, Bruce and Piesse, Jenifer (2011) A reassessment of stock market integration in SADC: the case of Namibia. In 8th African Finance Journal Conference, Windhoek, Namibia. University of Namibia. 33 pp .

Record type: Conference or Workshop Item (Paper)

Abstract

The New Economic Partnership for Africa’s Development focuses on the benefits to integration of many smaller African markets with South Africa as the central hub motivated by a wish to attract foreign investment and increase liquidity. However, little attention has been paid to issues regarding migration of liquidity and loss of the price discovery mechanism in a integrated union where one market dominates. This paper reviews this policy using the example of Namibia, which is the first market to be fully integrated with South Africa. Several established liquidity constructs are compared to determine their ability to explain the bid-ask spread plus a newly introduced measure of the proportion of daily zero returns which captures the dynamics of the price discovery process and traders’ ability to trade on informational grounds that is found to be more appropriate in highly illiquid frontier markets such as Namibia. Finally there is evidence that liquidity (and illiquidity) is closely linked to the rule of law and control of corruption institutional quality measures, while the price-discovery process and hence trader participation in markets is highly sensitive to the control of corruption, political stability and regulatory quality.

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Total Namibia AFE 2012 R&R
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Published date: 20 April 2011
Venue - Dates: 8th African Finance Journal Conference, University of Namibia, Namibia, 2011-04-18 - 2011-04-21

Identifiers

Local EPrints ID: 423409
URI: http://eprints.soton.ac.uk/id/eprint/423409
PURE UUID: d3854e52-46ed-4bbb-8ccf-34971475872f
ORCID for Bruce Hearn: ORCID iD orcid.org/0000-0001-9767-0198

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Date deposited: 21 Sep 2018 16:30
Last modified: 08 May 2020 00:44

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Contributors

Author: Bruce Hearn ORCID iD
Author: Jenifer Piesse

University divisions

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