Global Stock Market Linkages in Developed and Emerging Markets: A Case of United States, South Africa and Nigeria

Abstract

This study investigated whether African stock markets of Nigeria and South Africa are integrated with the US market. Using the Engle-Granger cointegration approach, the study found evidence of the presence of a long run relationship between the US market with that of Nigeria but not with South Africa over the period 2003 to 2018. Furthermore, the Nigerian and South African markets are linked together in the long-run. No short-run association found between either Nigeria and the US market or Nigeria and South Africa. By implication, these findings make it possible to infer that scope for arbitrage and diversification benefits exist for international investors who are willing to hold stocks in both the US and South African market.