The State of African Stock Markets

Abstract

The paper looks at the state of African stock markets during and after the global economic crisis of 2008. The research focuses on the market performance of 15 African stock exchanges from 2007-2012. The size and liquidity of stock markets in the African region is discussed in this thesis. In addition, it compares the performances of a few indexes in the emerging and developed markets to that of African indexes. Data is gathered from individual stock markets as well as notable institutions such as World Federation of Ex-changes (WFE), African Stock Exchange Association (ASEA) available in ASEA Year-books, World Bank etc. In assessing the size and liquidity of the various markets, the re-searcher uses the market capitalization, number of listed companies, turnover ratio etc. For the stock return assessment, the researcher adopts the use of annualized stock returns. Risk-adjusted performance is ascertained through the analysis of a Sharpe ratio. The findings of this thesis have it that although African stock markets have increased in number, they generally remain small in size and illiquid with the exception of South African stock market (JSE). Nonetheless, they yield remarkable returns. Volatility still remains an issue of African stocks although they are often as volatile as that of some emerging markets. African stock markets account for a meagre percentage of the world market capitalization when compared to developed markets such as US and EU Area. But investments in the African equity markets seem to yield good returns despite the perception about the region’s risk and volatility levels. African stock indices, under particular periods of investments, compared to both emerging and developed market indexes are also recording positive returns. Both S&P and MSCI African indices seem to be performing well on the global market.