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Equity market integration versus segmentation in three dominant markets of the Southern African Customs Union: Cointegration and causality tests

Equity market integration versus segmentation in three dominant markets of the Southern African Customs Union: Cointegration and causality tests
Equity market integration versus segmentation in three dominant markets of the Southern African Customs Union: Cointegration and causality tests

Empirical tests of theories of financial market integration and segmentation have predominantly focused on developed OECD countries and the emerging markets of Asia Pacific. This study uses a unique panel of equity market indices from the principal Southern African Customs Union (SACU) markets. It tests the hypothesis of market integration using a cointegration approach. Markets that are found to be integrated are then tested for evidence of Granger causality through an error correction mechanism. Results obtained using VAR modelling techniques are compared to those using an ARDL model. While results lend support to existing trade, macroeconomic and developmental linkages and effects between and within the countries, there is some evidence for the presence of a regional factor common to African Emerging Markets that explains causality from Namibia to South Africa. The results support the view that institution building has progressed, which is considered to be a valuable contribution to growth promotion policies in SSA and market integration throughout financial markets in the SADC community.

0003-6846
1711-1722
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2

Piesse, Jenifer and Hearn, Bruce (2002) Equity market integration versus segmentation in three dominant markets of the Southern African Customs Union: Cointegration and causality tests. Applied Economics, 34 (14), 1711-1722. (doi:10.1080/00036840110119448).

Record type: Article

Abstract

Empirical tests of theories of financial market integration and segmentation have predominantly focused on developed OECD countries and the emerging markets of Asia Pacific. This study uses a unique panel of equity market indices from the principal Southern African Customs Union (SACU) markets. It tests the hypothesis of market integration using a cointegration approach. Markets that are found to be integrated are then tested for evidence of Granger causality through an error correction mechanism. Results obtained using VAR modelling techniques are compared to those using an ARDL model. While results lend support to existing trade, macroeconomic and developmental linkages and effects between and within the countries, there is some evidence for the presence of a regional factor common to African Emerging Markets that explains causality from Namibia to South Africa. The results support the view that institution building has progressed, which is considered to be a valuable contribution to growth promotion policies in SSA and market integration throughout financial markets in the SADC community.

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Published date: 2002

Identifiers

Local EPrints ID: 423411
URI: http://eprints.soton.ac.uk/id/eprint/423411
ISSN: 0003-6846
PURE UUID: 0256ccba-a1c0-4a85-baec-d685b00abf1a
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: 16 Mar 2024 04:37

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Contributors

Author: Jenifer Piesse
Author: Bruce Hearn ORCID iD

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