Volume 5, Number 3 / September , Pages 155-224
An Analysis of the Dynamic Relationships Between the South African Equity Market and Major World Equity Markets
Multinational Finance Journal, 2001, vol. 5, no. 3, pp. 201-224
Asjeet S. Lamba , The University of Melbourne, Australia    Corresponding Author
Isaac Otchere , The University of Melbourne, Australia

Abstract:
This paper provides the first comprehensive analysis of the dynamic relationships between the South African and major world equity markets during May 1988 - May 2000. Using a multivariate cointegration framework and vector error-correction modeling the results indicate that there is a long-run relationship between the South African market and major developed markets. Over the full sample period, the US, Canada and Australia exert the most influence on South Africa, while the influence of Japan is minimal. The subperiod analysis shows that, during the Apartheid period, a long-run equilibrium relationship between South Africa and the major developed markets did not exist. In contrast, during the post-Apartheid period, the long-run relationship has become strong and statistically significant for all the major developed markets, except Japan. Overall, the results imply that South Africa is now much more economically and financially integrated with major developed markets, and that the removal of Apartheid has played a significant role in this process

Keywords : co-integration; emerging markets; South Africa; vector errorcorrection model
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