African sovereign risk premia and international market assets: A relook under the COVID-19 outbreak
Using the wavelet multiscale coherence technique, the paper examines the interdependences between global market assets, sovereign credit default swap (CDS) and yield-to-maturity on bond spread for African economies from January 2019 to March 2023. The empirical results primarily reveal a high level...
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Elsevier
2024-11-01
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| Online Access: | http://www.sciencedirect.com/science/article/pii/S2405844024162251 |
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| author | Godfred Amewu Nana Kwame Akosah Mohammed Armah |
| author_facet | Godfred Amewu Nana Kwame Akosah Mohammed Armah |
| author_sort | Godfred Amewu |
| collection | DOAJ |
| description | Using the wavelet multiscale coherence technique, the paper examines the interdependences between global market assets, sovereign credit default swap (CDS) and yield-to-maturity on bond spread for African economies from January 2019 to March 2023. The empirical results primarily reveal a high level of coherence between global market assets and Africa's sovereign CDS and yield-to-maturity, although varying across countries and time-frequency domain. Notably, the high degree of coherence and the positive co-movement between sovereign CDS and global market assets are more concentrated at the medium and upper frequency bands. The observed intensity of co-movements between global market assets and sovereign CDS/yield-to-maturity (YTM) of bond spread, with global market assets broadly serving as leading variables, suggests that an increased global investor's risk aversion positively affects the yields on Africa market bonds. Among the global market assets, we identified that VIX (which is implied volatility of S&P500) has the dominant influence on Africa sovereign CDS/YTM compared to that emanating from Bitcoin and Godman Sachs Commodity Index. This is highly conceivable as VIX gauges bubbling global risks and uncertainties which considerably influences investor's risk aversion. The heterogeneous lead/lag dynamics also provide useful information to global investors, including by utilizing African markets to rebalance their portfolios for risk management purposes. The empirical findings thus provide further critical information to investors for hedging purposes, and to policymakers in formulating sovereign risk management policies oriented towards minimizing sovereign default risks. |
| format | Article |
| id | doaj-art-fd3c3586ca52433a8c46a9cb5785e7f6 |
| institution | Kabale University |
| issn | 2405-8440 |
| language | English |
| publishDate | 2024-11-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Heliyon |
| spelling | doaj-art-fd3c3586ca52433a8c46a9cb5785e7f62024-11-15T06:14:33ZengElsevierHeliyon2405-84402024-11-011021e40194African sovereign risk premia and international market assets: A relook under the COVID-19 outbreakGodfred Amewu0Nana Kwame Akosah1Mohammed Armah2Department of Finance, University of Ghana Business School, University of Ghana, Legon, Accra, Ghana; Corresponding author.Research Department, Bank of Ghana, Accra, GhanaDepartment of Accounting and Finance, School of Business, Ghana Institute of Management and Public Administration (GIMPA), Achimota, GhanaUsing the wavelet multiscale coherence technique, the paper examines the interdependences between global market assets, sovereign credit default swap (CDS) and yield-to-maturity on bond spread for African economies from January 2019 to March 2023. The empirical results primarily reveal a high level of coherence between global market assets and Africa's sovereign CDS and yield-to-maturity, although varying across countries and time-frequency domain. Notably, the high degree of coherence and the positive co-movement between sovereign CDS and global market assets are more concentrated at the medium and upper frequency bands. The observed intensity of co-movements between global market assets and sovereign CDS/yield-to-maturity (YTM) of bond spread, with global market assets broadly serving as leading variables, suggests that an increased global investor's risk aversion positively affects the yields on Africa market bonds. Among the global market assets, we identified that VIX (which is implied volatility of S&P500) has the dominant influence on Africa sovereign CDS/YTM compared to that emanating from Bitcoin and Godman Sachs Commodity Index. This is highly conceivable as VIX gauges bubbling global risks and uncertainties which considerably influences investor's risk aversion. The heterogeneous lead/lag dynamics also provide useful information to global investors, including by utilizing African markets to rebalance their portfolios for risk management purposes. The empirical findings thus provide further critical information to investors for hedging purposes, and to policymakers in formulating sovereign risk management policies oriented towards minimizing sovereign default risks.http://www.sciencedirect.com/science/article/pii/S2405844024162251C32G11G15 |
| spellingShingle | Godfred Amewu Nana Kwame Akosah Mohammed Armah African sovereign risk premia and international market assets: A relook under the COVID-19 outbreak Heliyon C32 G11 G15 |
| title | African sovereign risk premia and international market assets: A relook under the COVID-19 outbreak |
| title_full | African sovereign risk premia and international market assets: A relook under the COVID-19 outbreak |
| title_fullStr | African sovereign risk premia and international market assets: A relook under the COVID-19 outbreak |
| title_full_unstemmed | African sovereign risk premia and international market assets: A relook under the COVID-19 outbreak |
| title_short | African sovereign risk premia and international market assets: A relook under the COVID-19 outbreak |
| title_sort | african sovereign risk premia and international market assets a relook under the covid 19 outbreak |
| topic | C32 G11 G15 |
| url | http://www.sciencedirect.com/science/article/pii/S2405844024162251 |
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