Efficient Market Hypothesis in the Presence of Market Imperfections: Evidence from Selected Stock Markets in Africa

Kelikume, Ikechukwu and Evans, Olaniyi and Iyoha, Faith (2020): Efficient Market Hypothesis in the Presence of Market Imperfections: Evidence from Selected Stock Markets in Africa. Published in: International Journal of Management, Economics and Social Sciences (IJMESS) , Vol. 9, No. 1 (2020): pp. 37-57.

Abstract

This paper investigates the weak-form efficient market hypothesis of top twenty eight stock markets in Africa. The paper deviates from the conventional linear approach of testing efficient market hypothesis and the method of using the runs test for serial dependency to test the weak-form efficient market hypothesis. The paper adopts the wavelet unit root analysis-tool which decomposes the stochastic processes into its wavelet components, with specific frequency band. There are currently over 29 stock exchanges in Sub-Saharan Africa with a wide degree of disparities ranging from market size, trading volume, number of listed companies, access to funds, access to information to market standardization. These institutional constraints have implications for the efficient market hypothesis and investment in the African stock market. The main objectives of this study is to examine the weak axiom of the efficient market hypothesis as it applies to twenty eight of the leading stock markets in Africa and to use a new technique-the wavelet unit root test approach to investigate the efficient market hypothesis in African. Conclusion drawn from the study will test the relevance of using past historical stock prices to predict the current earnings in stock prices in Africa.

• Item Type: MPRA Paper
• Language: English
• Keywords: Efficient Market, Information Asymmetry, Stocks Prices
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

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