Original Articles

International stock market linkages in Southern Africa

Published in: South African Journal of Accounting Research
Volume 13, issue 2, 1999 , pages: 27–51
DOI: 10.1080/10291954.1999.11435087
Author(s): K R JefferisBank of Botswana,, C C OkeahalamDonald Gordon Professor of Banking and Finance, Graduate School of Business Administration,


The paper examines linkages between stock markets in South Africa, Botswana and Zimbabwe, and between these markets and stock markets elsewhere in the world, specifically emerging markets in Latin America and Asia and developed markets in the USA and the UK, over the period 1989–96. The topic is of interest given apparent co-movements in global stock markets during the Asian financial crisis of 1997 and earlier during the Wall Street crash of 1987. By examining the extent to which Southern African markets are linked to each other and to other international markets the paper provides insight into the process of international financial integration and its implications for international investment strategies. Analysis is carried out using correlations of market returns (for short term linkages) and cointegration analysis of market indices (for long term linkages). The results show that in the short term the. South African market is closely related to international markets, particularly the UK and Asian markets. Botswana is related to the two other regional markets but not other emerging markets, while Zimbabwe shows little evidence of relationships with other markets. Longer term relationships are not clearly established. however, except between Botswana and South Africa. The results indicate that the process of integration between Southern African markets,’ and of those markets into the international financial system, is still at an early stage.

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