Analyzing the Dynamic Equicorrelation Between Shanghai Composite (SSEC) and Austral African Stock Market Indices

Abstract

In this article, we employ the GARCH-DECO (1,1) to investigate empirically the dependence between Shanghai Composite (SSEC) and Austral African stock market indices. We utilize daily return indices over the period from January 4, 2006 to December 30, 2016. From the empirical findings, the conditional dependence between Shanghai Composite (SSEC) and Austral African stock market indices show the existence of high volatility and confirm the existence of a significantly time-varying variance in the conditional linkages between time series returns obtained after the estimation of the GARCH-DECO (1,1) model. Additionally, the conditional heteroscedasticity volatility prediction attains the maximum after the financial crisis of 2007, especially in 2008 and 2009. Our empirical results indicate the existence of high dependency between Shanghai Composite (SSEC) and Austral African stock market indices which prove the financialization of Chinese stock market and Austral African stock market indices. We also find some evidence on the leadership of China in the African region. We discuss implications for the financial integration literature.

Keywords:

• dynamic equicorrelation
• financialization
• China
• Austral African

ACKNOWLEDGMENTS

I would like to thank the editor in chief Professor Hung Gay Fung and anonymous reviewers for their supportive comments and suggestions.