The study examines the degree of regional and global integration of 11African
Stock Markets (ASMs) using monthly return series from 1997 to 2015. It tests
for the existence of structural breaks and whether any detected significant
break in the regional and global degrees of integration caused an increase or
decrease in segmentation. Additionally, the study examines the impact of the
2008 Global Financial Crisis (GFC) on the regional and global integration
of the ASMs. Evidence is provided that suggests: (i) a time-varying regional
and global integration of the ASMs; and (ii) that global integration dominates
regional integration for all of the ASMs. The ASMs are more globally integrated,
relative to their degrees of regional integration. Significant structural breaks are
detected, which for most countries are associated with an increase in the degree
of integration and for others a decrease in the degree of integration. Most of the
observed structural breakpoints in the degree of global integration correspond
with the GFC; however, the structural shifts in regional integration are largely
unrelated to the GFC. The evidence shows that geographic proximity may have
minimal impact on market integration unless there is an associated regional
economic integration. Regional diversification benefits may thus exceed that of
global diversification and vice versa depending on the extent and direction of
economic activities of the economies of the geographic region.

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Keywords

Market integration, Structural breaks, Diversification gains, Emerging markets, Africa