The changing hierarchy of G7 equity spillovers to South Africa: Evidence across time and investment horizons
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The changing hierarchy of G7 equity spillovers to South Africa: Evidence across time and investment horizons
Jakubose Siband and Jones Odei-Mensah
Publisher: African Review of Economics and Finance
Pub: 2026-09-29 08:53:38
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This study examines whether the hierarchy of G7 connectedness with the South African equity market remains stable through time and across investment horizons. Using 4,520 daily USD-denominated stock index returns for South Africa and the seven G7 markets from 3 July 2006 to 27 October 2023, the study combines a Time-Varying Parameter Vector Autoregressive (TVP-VAR) connectedness framework with bivariate and multivariate wavelet analysis. The ordinary Total Connectedness Index (TCI) is 73.06%, while the corrected TCI is 83.49%, indicating substantial cross-market dependence, and the JSE is predominantly a net receiver within the estimated network. On average, the largest contributions to JSE forecasterror variance originate from the United Kingdom, France and Germany, whereas U.S.–JSE bilateral connectedness rises sharply around the COVID-19 episode, reaching its highest observed level just below 80%. Bivariate wavelet evidence further shows that JSE–G7 co-movement and lead–lag relationships vary across time and investment horizons. In the multivariate analysis, the CAC40 maximizes wavelet multiple correlation at all seven MODWT detail levels. Wavelet multiple cross-correlation similarly identifies the CAC40 as the maximizing market at every scale, with predominantly contemporaneous maxima and a one-day lead at the 64–128-day horizon. The findings show that system-wide connectedness, JSE-specific exposure, episode-specific bilateral connectedness and horizon-specific multivariate dependence need not identify the same G7 market as most important for South Africa.
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Keywords
South African Equity Market, G7 Stock Markets, Equity Spillovers, Dynamic Connectedness, Directional Connectedness, Investment Horizons
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Keywords
South African Equity Market, G7 Stock Markets, Equity Spillovers, Dynamic Connectedness, Directional Connectedness, Investment Horizons