Abstract

This paper aims at examining volatility spillover effects among the returns of three out of the four securities exchanges in East Africa. Vector autoregressive model was used to model return series evolution; and, Johansen co-integration test, was further applied to examine any possibilities of co-integration. Dynamic conditional correlation model was then employed to explore the dynamics of conditional variances. Daily closing all share indices data spanning the period 29 February 2008 to 28 February 2018 was used. The results of the study revealed that, there is bidirectional causality between Nairobi securities exchange and Dar es salaam securities exchange; unidirectional effect between Nairobi securities exchange and Uganda securities exchange; while between Dar es salaam securities exchange and Uganda securities exchange, there is a unidirectional effect. The study findings also indicate evidence of no co-integration, thus, no long-run relationship among the exchanges. The dynamic conditional correlation proved to be the most parsimonious model whose results indicated evidence of volatility spillover among the securities exchanges.

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