University of Sussex
Browse

File(s) not publicly available

A reassessment of stock market integration in SADC: the determinants of liquidity and price discovery in Namibia

journal contribution
posted on 2023-06-09, 04:08 authored by Bruce Hearn, Jenifer Piesse
The New Economic Partnership for Africa's Development (NEPAD) focuses on the benefits of integrating many smaller African markets with South Africa as the central hub, motivated by a wish to attract foreign investment and increase the liquidity. However, little attention has been paid to issues regarding the migration of liquidity and the loss of the price discovery mechanism in an integrated union where one market dominates. This article reviews this policy using the example of Namibia, which is the first market to be fully integrated with South Africa. Several established liquidity constructs are compared to determine their ability to explain the bid–ask spread plus a newly introduced measure of the proportion of daily zero returns, which captures the dynamics of the price discovery process and traders’ ability to trade on informational grounds that is found to be more appropriate in highly illiquid frontier markets, such as Namibia. Finally, there is evidence that liquidity (and illiquidity) is closely linked to the rule of law and institutional quality measures of the control of corruption, while the price-discovery process (and hence trader participation in markets) is highly sensitive to the control of corruption, political stability and regulatory quality.

History

Publication status

  • Published

Journal

Applied Financial Economics

ISSN

0960-3107

Publisher

Taylor & Francis

Issue

2

Volume

23

Page range

123-138

Department affiliated with

  • Business and Management Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2016-11-22

Usage metrics

    University of Sussex (Publications)

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC