International Journal of Econometrics and Financial Management
ISSN (Print): 2374-2011 ISSN (Online): 2374-2038 Website: Editor-in-chief: Tarek Sadraoui
Open Access
Journal Browser
International Journal of Econometrics and Financial Management. 2019, 7(1), 37-45
DOI: 10.12691/ijefm-7-1-5
Open AccessArticle

Cointegration Analysis of Major African Stock Markets

Jimbo Henri Claver1, , Bruno Dinga2, Fono Louis3, Shu Felix2 and Andjiga Gabriel4

1Department of Applied Mathematics and Statistics, AUAF & Waseda University, Tokyo, Japan, (Joint Research)

2Department of Mathematics and Computer Science, University of Bamenda, Cameroon

3Department of Applied Mathematics, University of Douala, Cameroon

4Department of Applied Mathematics, University of Yaounde - I, Cameroon

Pub. Date: September 20, 2019

Cite this paper:
Jimbo Henri Claver, Bruno Dinga, Fono Louis, Shu Felix and Andjiga Gabriel. Cointegration Analysis of Major African Stock Markets. International Journal of Econometrics and Financial Management. 2019; 7(1):37-45. doi: 10.12691/ijefm-7-1-5


Globalization, technological advancements and financial liberalization have made it possible for stock markets in different countries to interact and affect and/or influence each other both in the short-run and in the long-run. This study uses the Dickey-Fuller, Engle-Granger method and the Johansen method to test for cointegration using a pair wise analysis between the stock markets in five African countries. These countries are Nigeria, Egypt, South Africa, Morocco, and Mauritius. The Granger causality test is equally used to understand the short-run linkages between the stock markets. All statistical tests are carried out using the R statistical software. Weekly stock indices from January 2010 to December 2015 are employed, with each stock price expressed in local currency. Correlation between the stock markets is very low, with the strongest correlation coefficient being just 31% between the stock Exchange of Mauritius and the Johannesburg Stock Exchange. Cointegration analyses reveal long-run associationship between twelve, out of the twenty-one pairs of stock markets. Granger causality tests reveal bidirectional causality between the South African and Mauritian stock markets and the South African and Nigerian stock markets. Unidirectional causality was also found from the Nigerian stock market to the Moroccan stock market and from the Nigerian stock market to the Mauritian stock market. This research will help investors to invest wisely in the stock markets examined. It will equally aid economic experts and policy makers in these countries to understand the impact of a shock on economic variables on the economy.

Co-integration Johansen test Engle-Granger test Dickey-Fuller test Granger causality time series analysis stock markets econometric.

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit


[1]  Murray, M. P. (1994). A Drunk and Her Dog: An Illustration of Cointegration and Error Correction. The American Statistician. 48(1): 37-39.
[2]  Soo, L. B. and Nam, B. N. (1995). Common Stochastic Trends and Predictability of International Stock Prices. Journal of the Japanese and International Economies 9(3): 245-277.
[3]  Shirvani, H., Delcoure, N., and Wilbratte, B. (2011). Periodic Integration and Cointegration of U S stock prices, dividends and interest rates: A new test of the present value model. Journal of CENTRUM Cathedra 4(1): 66-76.
[4]  Agyei-Ampomah, S. (2011). Stock market integration in Africa. Managerial Finance 37(3): 242-256.
[5]  Gilmore, C. G., and McManus, G. M. (2003). Bilateral and Multilateral cointegration properties between the German and Central European Equity markets. Studies in Economics and Finance 21(1): 40-53
[6]  Golab, A., Jie, F., Powell, R. and Zamojska, A. (2018). Cointegration between European Union and selected global markets following the Sovereign debt crisis. Investment Management and Financial Innovations 15(1): 35-45
[7]  Adebola, S, S. and Dahalan, J. (2012). An empirical analysis of stock markets integration in selected African countries. EuroEconomica 2(31): 166-177.
[8]  Ncube, G. and Kapingura, F. M. (2015). Stock market integration in Africa: The case of the Johannesburg stock exchange and selected African countries. International Business and Economics Research Journal 14(2): 367-386.
[9]  Ogbonna, B., Iheanacho, E. and Okere, K. (2018). Cointegration, Dynamic Linkage and Portfolio Diversification from Selected Stock Markets in Africa. Journal of Economics and Finance. 9(4): 21-37.
[10]  Onour, I. (2009). Financial integration of North Africa stock markets. Munich Personal RePeC Archive Archive no. 14938.
[11]  Enders, W. (2015). Applied Econometric Time Series (Fourth Edition). New York, John Wiley and Sons, Inc.
[12]  Johansen, S. (1991). Statistical analysis of cointegration vectors. Economic Dynamic Control, 12: 231-254.
[13]  Johansen, S. and Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration-with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52: 169-210
[14]  Sahu, P. K., Dey, S., Sinha, K., Singh, H., and Narsimaiaha, L. (2019). Cointegration and price discovery mechanism of major spices in India. American Journal of Applied Mathematics and Statistics, 7(1): 18-24.
[15]  Jimbo H.C., et al., (2004). Optimum Values Search in a Martingale Financial Market, Journal of Nonlinear and Convex Analysis 5 no. 3 349-360, Editor: W. Takahashi and T. Tanaka, Publisher: Yokohama Publisher, Japan.
[16]  Engle R.F and Granger C.W.J, (1987). Co-integration and Error correction representation, estimation and testing. Econometrica, Vol 55, No2, pp 251-276.