Financial crisis, the real sector and global effects on the African stock markets

We decompose the variance of African stock markets (ASMs) index returns into the country and global components. Relying on the estimated global components, we explore the drivers of global effects on the ASMs. We observe a surge in the global effects on all of the ASMs around the period of the Global Financial Crisis (GFC). The rise in the global effects appears not to have reversed post-GFC. The evidence shows that the impact of the GFC on the global effects on the African markets was delayed and largely through the real sector. Similarly, the most liquid and most capitalized African markets were mostly affected by the GFC, and appears to have a higher global influence in their index returns relative to the less liquid and less capitalized markets post-GFC.