Spillover effect in African stock markets

Abstract

The purpose of this study is to investigate the spillover in the African stock markets; using the VAR-EGARCH model over an 11 years period which cover the recent global financial crisis. The estimates of restricted and the unrestricted model confirm the existence of first and second moment interdependence. The results of this studyshow that:(i) volatility spillover is asymmetry, this asymmetry decreases as the market become interdependent.(ii) The persistence in volatility in stock market is very high close to unity, and the time needed to reduce it by half is more than six days for all markets, this persistence increases as the markets become interdependent. (iii)The spillover effect in term of both return and volatility increased in period followed the crisis due to the contagion effect caused by the crisis; the persistence in volatility decreases, while the degree of asymmetry is increased in the post-crisis period.