Regional integration of equity markets in Sub-Saharan Africa

Equity markets in developing and emerging economies have grown in number and importance as a result of financial market globalisation. However, their role in economic growth and development is enhanced if nascent markets are integrated with well-established ones. Market integration, measured by the transmission of returns volatility, is identified across a sample of SSA countries, using a unique dataset. Evidence for potential integration between financial markets in Sub-Saharan Africa (SSA) is found. Spillovers are found across markets, some unidirectional and others bi-directional. However, continued illiquidity and incomplete institutions indicate that an integrated financial community remains premature, and considerable regulatory reform and harmonisation will be necessary for this to succeed. © 2005 Economic Society of South Africa.