The efficient market hypothesis: Evidence from ten African stock markets

Mlambo, Chipo and Biekpe, Nicholas (2007): The efficient market hypothesis: Evidence from ten African stock markets. Published in: Investment Analysts Journal No. 66 (2007): pp. 5-18.

Abstract

The paper investigates the weak-form efficiency of ten African stock markets using the runs test methodology for serial dependency. Returns are calculated using the adjusted trade-to-trade approach. Serious thin-trading was observed on all markets, and more so for Namibia and Botswana, the two markets with significant dual-listed stocks on the JSE. In many of the markets studied, a significant number of stocks rejected the random walk. Only three markets, Namibia, Kenya and Zimbabwe, were found to be relatively weak form efficient. The result for Namibia is attributed to its correlation with the JSE. Kenya and Zimbabwe are much older than most of the other markets studied. All the stocks in the Mauritian sample rejected the random walk at the 1% level of significance using the runs test and is thus said to be weak form inefficient. The same conclusion is reached for Ghana, the BRVM, Egypt and Botswana. Thus the possibility of profiting by trading on historical prices could not be entirely ruled out.

• Item Type: MPRA Paper
• Language: English
• Keywords: Market efficiency, African stock markets, random walk, thin trading
• Subjects: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; N - Economic History > N2 - Financial Markets and Institutions > N27 - Africa ; Oceania; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance

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