Acta Universitatis Danubius. Œconomica, Vol 15, No 4 (2019)

Abstract

Many SSA countries are exports dependent and rely heavily on global price of their primary commodities to make rational economic decisions. It is against this background this study investigates the level of interdependence between global commodities prices and stock market returns in selected SSA countries. For the purpose of this empirical investigation, two largest stock markets were selected based on market capitalization namely Johannesburg Stock Exchange (JSE) and Nigerian Stock Exchange (NSE). Specifically; we examined the relationship between global commodities prices and Stock market returns and the direction of causality between the variables following Eagle Granger causality procedures. In addition, we determined the effect of global commodities’ prices movement on stock market returns using ARDL estimation technique. The results of our analyses show that there is a significant long-run relationship between global commodities prices and stock market returns. Also, there exists a largely bi-directional causal relationship between global commodities prices and Stock market returns in the two markets. Furthermore, the results of ARDL estimation reveal that global commodities prices have short-run and long-run effects on stock market returns in the two markets.