The law of one price: an examination of price integration between Europe and regional markets in Africa
This study examines the degree of price-integration of equity indices between the major markets of Africa, namely Morocco, Tunisia, Egypt, Kenya, Nigeria, Namibia and South Africa with the European markets of London and Paris. Vector Autoregressive and Autoregressive Distributed Lag
methods reveal that African markets are largely price-segmented. The only markets that are price-integrated have shared economic and financial institutions, such as Namibia and South Africa, and Egypt, Tunisia and France. The evidence suggests that development policy should be focussed on
enhancing existing institutions rather than embarking prematurely on regional integration.
Keywords: C22; F15; O16; Sub-Saharan Africa; causality; financial market integration
Document Type: Research Article
Affiliations: 1: Management Centre, School of Social Science and Public Policy, Kings College, University of London, 150 Stamford St, London SE1 9HN, UK 2: School of Management, University of Leicester, Ken-Edwards Building, Leicester LE1 7RH, UK
Publication date: 01 August 2012
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