Do Benchmark African Equity Indices Exhibit the Stylized Facts?
Posted: 28 May 2010
Date Written: May 27, 2010
Abstract
This paper investigates if benchmark African equity indices exhibit the stylized facts reported for financial time-series returns. The returns distributions of the Africa All-Share, Large, Medium and Small Company Indices were found to be leptokurtotic, had fat-tails, over time experienced volatility clustering and exhibited long memory in volatility. Both the All-Share and Large Company Indices were found to exhibit leverage effects. In contrast, positive shocks had a greater impact on future volatility for the Small Company Index which implies a reverse leverage effect. This finding could reflect a bull/bubble market for small capitalisation stocks in Africa.
Keywords: Africa All-Share Index, Stylized facts, GARCH, Fat-tails, Long memory
JEL Classification: G14, G15, O16
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