African Equity and Bond Returns

Abstract

Equities and bonds have historically been the two largest asset classes in the international financial markets. Whether from an international or local perspective, extensive research has been performed on their respective behaviours, especially to determine which asset class was superior. However, Africa’s financial markets have been overlooked. This was likely due to lack of data and Africa’s relatively small market capitalisation size. This research study explored the gap of literature that overlooked the examination of the dynamics of the two asset classes across Africa, with an emphasis on outperformance and correlation behaviours. With the use of quantitative methods, such as return and correlation metrics, it was found bonds outperformed equities in more than half the countries. The results provide opportunities of international diversification within the region.