TY - JOUR
T1 - Information flow between global financial market stress and African equity markets
T2 - An EEMD-based transfer entropy analysis
AU - Armah, Mohammed
AU - Bossman, Ahmed
AU - Amewu, Godfred
N1 - Publisher Copyright:
© 2023 The Authors
PY - 2023/3
Y1 - 2023/3
N2 - The flow of information between markets is important to guide investors and policymakers in the effective allocation of assets and proactive market regulation, respectively. This study examines the impact of information flow from global financial market stress on the African stock markets using the daily US financial stress index (USFSI) and other advanced economies' financial stress index (OAEFSI) to proxy the global financial stress index. To understand the information flow dynamics across various investment horizons, the ensemble empirical mode decomposition (EEMD)-based transfer entropy is employed. Our findings reveal that African equity markets are highly risky for information flow from global financial market stress. However, we identify diversification prospects based on market conditions for Ghana and Egypt in the short term and Tanzania, Cote D'Ivoire, and Egypt in the medium term. Empirical results also show that the information flow from global financial stress to African stock markets depends on time scales, economic relations, and the state of global financial markets. The findings are important for investors, portfolio managers, practitioners, and policymakers.
AB - The flow of information between markets is important to guide investors and policymakers in the effective allocation of assets and proactive market regulation, respectively. This study examines the impact of information flow from global financial market stress on the African stock markets using the daily US financial stress index (USFSI) and other advanced economies' financial stress index (OAEFSI) to proxy the global financial stress index. To understand the information flow dynamics across various investment horizons, the ensemble empirical mode decomposition (EEMD)-based transfer entropy is employed. Our findings reveal that African equity markets are highly risky for information flow from global financial market stress. However, we identify diversification prospects based on market conditions for Ghana and Egypt in the short term and Tanzania, Cote D'Ivoire, and Egypt in the medium term. Empirical results also show that the information flow from global financial stress to African stock markets depends on time scales, economic relations, and the state of global financial markets. The findings are important for investors, portfolio managers, practitioners, and policymakers.
KW - African stock markets
KW - COVID-19 pandemic
KW - EEMD
KW - Effective transfer entropy
KW - Emerging markets
KW - Ensemble empirical mode decomposition
KW - Global financial market stress
KW - Information flow
UR - http://www.scopus.com/inward/record.url?scp=85148763670&partnerID=8YFLogxK
U2 - 10.1016/j.heliyon.2023.e13899
DO - 10.1016/j.heliyon.2023.e13899
M3 - Article
AN - SCOPUS:85148763670
SN - 2405-8440
VL - 9
JO - Heliyon
JF - Heliyon
IS - 3
M1 - e13899
ER -