Abstract:
ABSTRACT
Although newly-created alliances between African economies and top emerging markets may stimulate economic growth, the tendency to deepen
integration across African markets could render African markets less resilient
to global shocks as they are known. Notwithstanding, the financial market
meltdown occasioned by the COVID-19 outbreak has resulted in intense
commodity market volatility for which market participants in Africa have been
cautioned about its persistence. Motivated by investors’ relentless search for
safety assets and the ripple impact of the recent trade liberalisation in Africa,
this thesis examined the interdependence, spillover connectedness, and
information transfer between returns on global commodity classes and African
equity markets. Hinged on available and comparable data, the research
employed daily datasets – equity (Egypt, Ghana, Ivory Coast, Kenya, Malawi,
Morocco, Namibia, Nigeria, South Africa, Tanzania, Uganda, Zambia, and
Zimbabwe) and commodity (cocoa, coffee, copper, corn, crude oil, gold, natural
gas, palladium, palm oil, rice, sugar, and soybeans) market indices – spanning
from 22nd February 2010 to 4th February 2022. The findings from the study
underscored high interdependence between commodity and African equities in
the short term with idiosyncratic and contagious return spillovers. The effective
transfer entropy results suggested high uncertainties with commodity-African
equity investments although the markets are efficient in the medium-and-long term horizons. Regulators should deploy vibrant measures that could limit the
creation or transmission of shocks across markets. Portfolio managers should
deploy effective risk management strategies that capitalise on the changing roles
of some assets as diversifiers, hedgers, and safe-havens across time horizons
