Investor Herding and Spillovers in African Debt Markets

Hanan Morsy, Eman Moustafa, Tiguene Nabassaga and Mustafa Yenice

AEA Papers and Proceedings, 2021, vol. 111, 607-10

Abstract: Using high-frequency data for sovereign long-term bond yields and five-year credit default swap spreads, we estimate a regression model to identify a nonlinear link between cross-section deviation of market yield and extreme movements in African markets and other regions. Results indicate that African sovereign bonds have been subject to herding. International investors tend to lump African sovereign bonds into one asset class, pricing risk based on regional market performance instead of individual countries' performance. Moreover, we find evidence of herding spillovers from other regions. Africa is the most vulnerable of developing regions to shifts in market sentiment.

JEL-codes: G11 G15 O16 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1257/pandp.20211118

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