Author(s)

Thomas Chinwe Urama^*, Patrick Oseloka Ezepue, Chimezie Peters Nnanwa

Statistics, Information Modelling and Financial Mathematics Research Group, Department of Engineering & Mathematics, Sheffield Hallam University, Sheffield, UK.

This paper investigates the universal financial dynamics in two dominant stock markets in Sub-Saharan Africa, through an in-depth analysis of the cross-correlation matrix of price returns in Nigerian Stock Market (NSM) and Johannesburg Stock Exchange (JSE), for the period 2009 to 2013. The strength of correlations between stocks is known to be higher in JSE than that of the NSM. The stock price dynamics in the NSM is important for modeling Nigerian derivatives in the future, and in the light of this, it is pertinent to note that the interactions of other stocks with the oil sector are weak, whereas the banking stocks have strong positive interactions with the other sectors in the stock exchange. For the JSE, it is the oil sector and beverages that have greater sectorial correlations, instead of the banks which have a weaker one in relation to other assets in the stock exchange.

Random Matrix Theory, Cross-Correlations, Emerging Markets, Option Pricing, Eigenvalues Eigenvectors, Inverse Participation Ratios and Implied Volatility

Urama, T. , Ezepue, P. and Nnanwa, C. (2017) Analysis of Cross-Correlations in Emerging Markets Using Random Matrix Theory. Journal of Mathematical Finance, 7, 291-307. doi: 10.4236/jmf.2017.72015.