Browsing by Author "Melak, Getnet"

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    Modelling Volatility Spillovers from Developed stock markets to Selected African Stock Markets
    (Addis Ababa University, 2018-06-05) Melak, Getnet; Girma, Sourafel (professor)
    International stock markets have been characterized by increasing degree of integration. However, stock markets have been new phenomenon in Africa (more than half of African stock markets have been opened in the last decade). Development of stock market has an important role in promoting economical growth in the country. Due to financial linkage between stock markets, volatility could be spillovers from one to another. Thus, the main purpose of this thesis is to model volatility spillovers from developed stock markets to selected African stock markets using MGARCH models. The data for this purpose is weekly closing return data obtained from Bloomberg and span during the period from 1999 week 1 to 2017 week 46. Among many MGARCH methodologies to analysis volatility spillover, the conditional correlation model like CCC and DCC model are used in this study. Tri-variate VAR (1) model is fitted for the mean equation and have no serial correlation in the residuals while there were correlation in the squared residuals (ARCH effect) that is presence of volatility in the return data. The volatility of stock market returns was captured by Tri-variate DCC (1, 1) with t-distribution having 6 degree freedom in this thesis. From the results we concluded that there are volatility spillover from USA to South Africa, Europe to morocco and Europe to South Africa stock market returns. And volatility spillovers among those stock markets are strong and increasing over time in the study period. In sum volatility is spillovers from developed stock market returns to selected African stock markets except for Nigeria and Kenya and which agrees the finding of this thesis. This thesis attempts to recommend that further researcher could be investigate the volatility spillover from developed stock market to African stock market using conditional covariance model like BEKK and diagonal VECH and considering world financial crisis like 2008, to investigate volatility spillover effect before and after crisis . Last but not least, this thesis suggests further researcher would be dividing the study period in to two subsamples and forecasting volatility spillover.