Comovement of Asset Returns Between Single and Dual Listed Firms Within a Single Stock Exchange

This study analyzed the comovement of asset returns between single and dual listed firms on the Botswana Stock Exchange (BSE) with ultimate aim being to determine if investors can realize diversification benefits by investing across single and dual listed firms in a single stock exchange. Using correlation coefficient and the β coefficients of two univariate regression models in which returns of single listed firms were regressed against the returns of dual listed firms and vice versa to determine the strength and direction of the comovement of the asset returns respectively, evidence of weak but positive comovement of the returns was found. Since diversification benefits can be only be realized if assets are both weakly and negatively correlated, we concluded that it is not possible to reap diversification benefits by investing across single and dual listed firms on the BSE. Although weak comovement implied that it may possible to reap diversification benefits by investing across single and dual listed firms, evidence of positive comovement negate the realization of such potential diversification benefits.