Examining Stock Market Return and Volatility Spillover in West Africa

Financial markets have become more interconnected and interdependent over time. The interdependence of stock markets dovetails to equity market index comovements which could be in the form of returns and volatility spillover. This study examines return and volatility spillovers amongst stock markets in the West African region and with the United Kingdom (UK) and United States of America (US) markets considering an entire sample period from 2008 to 2016, and subsample periods of 2008-2010 representing the crises period, and 2011-2016 representing the post-crises period. The Generalized Autoregressive Conditional Heteroscedasticity (GARCH 1,1) model was utilised for the study. Findings revealed significant return and volatility spillover effect between most of the market pairs. While more volatility spillovers were observed than returns spillover, significant differences were also observed between the results for the different sub-sample periods. The findings have implications for local and foreign investors as well as policymakers at the national, regional and global levels.