Department of Business, Management and Economics, University of Sussex, Jubilee Building, Brighton, United Kingdom; Bournemouth University, University of Stellenbosch, South Africa
Hearn, B., Department of Business, Management and Economics, University of Sussex, Jubilee Building, Brighton, United Kingdom; Piesse, J., Department of Business, Management and Economics, University of Sussex, Jubilee Building, Brighton, United Kingdom, Bournemouth University, University of Stellenbosch, South Africa
Established illiquidity measures are constructed for emerging markets in Africa and used to determine which best explains trading costs. Costs of equity are derived from an augmented Capital Asset Pricing Model for a sample of emerging financial markets generally ignored in the literature. These include: South Africa and Namibia, three countries in North Africa and four in Sub-Saharan Africa (SSA), plus London and Paris as examples of integrated markets. Minimum variance portfolios are constructed and asset weights derived, with the sample divided into countries dependent on their legal regime. Portfolio weights are shown to be directly related to well-regulated markets with high standards of corporate governance and disclosure, and firms seeking cost-effective finance from SSA stock markets are at a distinct disadvantage compared with those in Northern Africa, South Africa and, in particular, London and Paris. © 2014 Economic Society of South Africa.