Comovement of african stock markets: Any influence from the COVID-19 pandemic?

Utilising daily data from twelve Sub-Saharan stock markets we investigate the co-movements and information transmission among African stock markets as a result of the impact of COVID while employing multiple wavelet techniques and applying the Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (CEEMDAN) to Renyi's and Shannon's effective transfer entropy analysis. The results infer that some number of co-movements exist among stock markets in Africa and that during periods of uncertainties, diversification through the creation of portfolios in African markets is not conducive since they tend to comove strongly during such periods. The study discovered that, a few of the markets responded to the pandemic in leads lags in the pre-, during and post-COVID era, as well as reacted to information transmission. Our findings generally show that information transmission/spillovers are more predominant in the short term than in the medium- and long-term horizons. The Renyi's effective transfer entropy recorded more negative information flows between African stock market than positive information flows, both during the COVID period and after. On the other hand, Shannon's entropy showed non-negative information flow across various time horizons. We conclude that even though most African stock markets were not prone to the contagion effect of the pandemic, it is of vital importance to re-evaluate the notion that African stock markets are immune to contagion of stock market co-movements, especially in times of global uncertainties.

Connectedness in cross-assets and digital assets attention indices.

We explore both the static and dynamic connectedness across traditional and unconventional assets classes using the Baruník-Krehlík connectedness and wavelets techniques. These techniques are used to characterise the static and rolling-window connectedness of 12 conventional assets and Non-Fungible Tokens (NFT), Index On Cryptocurrency Environmental Attention (ICEA) and Central Bank Digital Currency (CBDC) attention indices. Between January 25, 2010 and July 11, 2022, the wavelet multiple correlations showed increasing high levels of correlation through short-to long-terms; with DJI and SP500 dominanting with the tendency to lead or lag in the short-term. The Baruník-Krehlík technique also showed that spillover is higher at short-terms and gradually decreases across the periods. We also report a pair-specific, frequency-dependent connectedness across the assets and indices. Primarily, we show that Non-Fungible Tokens Attention Index (NFTAI) has a higher frequency-based time-varying spillover across assets than CDBC and ICEA. Regulators need to pay close attention to NFTs because they are not fungible and interchangeable neither can their ownership be transferred.

Co-movement between equity index and exchange rate: Fresh evidence from COVID-19 era.

This paper probes deeper into the co-movement of Ghana's equity index and exchange rate with international equity markets and further determine whether these co-movements are driven by global uncertainties. Also, we sought to determine how the COVID-19 pandemic alters the dynamics of these relationships. We employ the wavelet technique to data from January 19, 2012 to March 1, 2021 to the split between pre-COVID-19 and COVID-19 periods. The results reveal that the dynamics of co-movement or interconnectedness of exchange rate and Ghana Stock Exchange composite index has evolved over time and across frequencies. Besides, the cone of influence, as shown by the wavelet spectrum, does not cover the entire data frequency which suggests that long-term forecast of exchange rate and equity index in Ghana beyond four years could be misleading since significant levels of interdependences are concentrated around the mid-team scales. In addition, we found evidence to support low-medium term lead-lag connections between exchange rate and Ghana Stock Exchange Composite Index in 2013 to 2014 and 2016. Further, the co-movement between exchange rate or Ghana Stock Exchange Composite Index and international equity markets show similarly weak association at all scales. A closer scan of the interdependencies among these variables are more intense during COVID-19 than during the pre-COVID-19 period. Finally, we observe a strong co-movement between the rise in COVID-19 cases and exchange rate at higher frequency scales where exchange rate lags Ghana's equity index and they are out-of-phase.

Spillovers and contagion between BRIC and G7 markets: New evidence from time-frequency analysis.

We examine the time-frequency spillovers, contagion, and pairwise interrelations between the BRIC index and its constituents, and between BRIC and G7 economies. The extent of interdependencies between market blocs and their constituents needs to be ascertained in the time-frequency domain for efficient asset allocation and portfolio management. Accordingly, the Baruník and Krehlík spillover index is employed with daily data between 11th December 2015 and 28th May 2021. We find the overall and net spillovers between BRIC and G7 to be significant in the short-term, with France, Germany, and the UK transmitting the greatest shocks to BRIC markets. We find no significant evidence of any sporadic volatilities for the studied markets in the COVID-19 period across all frequencies. However, we reveal contagious spillovers between the BRIC and G7 economies across all time scales in 2017 and 2019, which respectively reflect the persistent effect of Brexit and the US-China trade tension. Our findings divulge that in the short-term (mid-to-long-term), France and the UK (Canada and the US), are the sources of contagion between the BRIC and G7 markets. From the net-pairwise spillovers, we report high connectedness between the BRIC index and its members. BRIC countries are found to be transmitters of net-pairwise spillovers to the G7 markets excluding Japan. We recommend portfolio diversification using BRIC and G7 stocks in the intermediate-to-long-term horizon, where spillovers are less concentrated. Additionally, since individual markets are impacted by their unique shocks, investors should pay close attention to these shocks when distributing assets. In the interim, policy-makers and governments across the globe should ensure effective liberalisation of their economies to encourage international trade flows to boost portfolio diversification.

Dynamic connectedness and spillovers between Islamic and conventional stock markets: time- and frequency-domain approach in COVID-19 era.

This study investigates the dynamic connectedness and spillovers between Islamic and conventional stock markets to reveal the time- and frequency-domain dynamics of the two asset classes under various market conditions. Using the spillover index of Baruník and Krehlík (2018), supplemented by the time-varying parameter vector autoregressions (TVP-VAR) connectedness model, we employ daily stock market indices for Islamic and conventional (G7) markets from November 23, 2015, to September 8, 2021. The findings explicate that the volatility spillovers across and within Islamic and/or G7 markets are time-varying and frequency-dependent but during market turbulences, the conventional stocks are prone to more volatilities than the Islamic stocks. Our findings additionally divulge contagious spillovers among Islamic and conventional stocks during Brexit and the studied COVID-19 period. Relative to mid-and long-term spillovers, we underscore the supremacy of short-term spillovers between Islamic and G7 markets. In turbulent trading periods, investors should utilise knowledge about market patterns and volatility to hedge their positions against lower stock returns, when spillover is more intense. Regulators should pay close attention to spillovers since they undermine cross-market connections. Intriguing findings and their implications are further discussed.

Financial sector and economic growth amid external uncertainty shocks: Insights into emerging economies.

The study aims to shed new lights on the lead-lag relationships between the financial sector (RFSI) and economic growth (GDP) in the midst of global economic policy uncertainty (GEPU) shocks for BRICS economies. Hence, the bivariate, partial, and wavelet multiple correlations techniques are employed. From the bivariate analysis, we document positive bi-directional causality between the RFSI and economic growth over the sample period. The partial wavelet reveals that GEPU shocks distort the significance and directional comovements between the RFSI and GDP. Moreover, the outcome from the wavelet multiple cross correlations (WMCC) indicates that the RFSI is a first mover at most time scales for the BRICS economies. This is followed by GEPU which either leads or lags for most scales, especially for South Africa. The impact of GEPU on RFSI and GDP is worst for South Africa in about four cases in the medium-, and long-terms. This signifies that South Africa's financial markets and economic growth are vulnerable to GEPU. However, the impetus for GEPU to drive the comovements between the financial sector and economic activity was less pronounced in the pre-COVID analysis conducted with the WMCC. The study supports both the supply-leading and demand-following hypotheses. Our findings also underscore the need for policymakers, investors and academics alike to incessantly observe the dynamics between finance and growth across time and periodicity while considering adverse shocks from global economic policy uncertainty in tandem.

Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies.

The purpose of this study is to provide insight into the lead-lag relationships between the BRIC stock index and its constituents. In addition, we assess the comovements between the US volatility index (VIX) as a measure of investor uncertainty and fear and stock returns of BRIC economies. Therefore, the bi-wavelet and wavelet multiple correlations approaches are utilised. Findings from the bi-wavelet technique indicate that there are high interdependencies between the BRIC index and its constituents throughout the time-frequency domain. In addition, comovements between the BRIC index and its constituents was positive and significant. Notwithstanding, we find the BRIC index to be the first variable to respond to shocks when all the study variables were considered in the wavelet multiple cross-correlations. Similarly, the stock market of Brazil is the next to respond to shocks. On the other hand, the stock market of Russia lags in the long-term when the BRIC index was excluded from the wavelet multiple cross-correlations. We also find a uni-directional causality between the VIX and the BRIC stocks in the medium-, and long-terms. Specifically, the US VIX significantly drives the BRIC stocks and considered to be negative. Findings from the study imply that global investors can select any of the stock markets in BRIC to allocate their investments due to their strong interdependencies which may facilitate trade and investments. However, portfolio diversification, safe haven or hedge benefits within this region may be minimal due to their high integration with the BRIC index which demonstrates positive significant comovements. The findings present relevant inferences for portfolio diversification, policy decisions, and risk management schemes. It is recommended that investors hedge against volatilities in the BRIC stock markets using the US VIX.