The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets

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dc.contributor.authorMloyi, Kelleb
dc.contributor.authorVengesai, Edson
dc.date.accessioned2025-04-23T22:05:39Z
dc.date.available2025-04-23T22:05:39Z
dc.date.issued2024
dc.description.abstractThis paper considers the impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations between the South African stock, bond, and foreign exchange markets. Our first stage findings using the DCC-GARCH model show that correlations between the selected markets are significantly dynamic over time. We further show that the correlations of asset pairs do not fall for extended periods during crisis periods, implying only short-lived increase in diversification benefits. Further analysis using the OLS regression model shows that global risk aversion and domestic macroeconomic factors have a heterogenous impact on the dynamic correlations of asset pairs. Consequent to these findings, this study advocates for the adoption of dynamic asset allocation and diversification strategies necessitating the periodic optimisation of portfolios as asset correlations, global risk aversion and domestic macroeconomics evolve. The study offers valuable insights and policy recommendations for investment practitioners, policymakers, and academics.
dc.description.versionPublisher's version
dc.identifier.citationMloyi, K., & Vengesai, E. (2024). The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets. Cogent Economics & Finance, 12(1), 2431543. https://doi.org/10.1080/23322039.2024.2431543
dc.identifier.issn2332-2039 (online)
dc.identifier.urihttps://doi.org/10.1080/23322039.2024.2431543
dc.identifier.urihttp://hdl.handle.net/11660/13037
dc.language.isoen
dc.publisherTaylor and Francis Group
dc.rights.holderAuthor(s)
dc.rights.licensehttps://creativecommons.org/licenses/by/4.0/
dc.subjectGlobal risk aversion
dc.subjectDynamic conditional correlation
dc.subjectDCC GARCH
dc.subjectDiversification
dc.subjectMacro-economic factors
dc.titleThe impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets
dc.typeArticle
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