Why African Stock Markets Should Formally Harmonise and Integrate their Operations

Ntim, Collins G (2012): Why African Stock Markets Should Formally Harmonise and Integrate their Operations. Published in: African Review of Economics and Finance , Vol. 4, No. 1 (29 December 2012): pp. 53-72.

Abstract

Despite experiencing rapid growth in their number and size, existing evidence suggests that African stock markets remain highly fragmented, small, illiquid and technologically weak, severely affecting their informational efficiency. Therefore, this study attempts to empirically ascertain whether African stock markets can improve their informational efficiency by formally harmonising and integrating their operations. Employing parametric and non-parametric variance-ratios tests on 8 African continent-wide and 8 individual national daily share price indices from 1995 to 2011, we find that irrespective of the test employed, the returns of all the 8 African continent-wide indices investigated appear to have better normal distribution properties compared with the 8 individual national share price indices examined. We also report evidence of statistically significant weak form informational efficiency of the African continent-wide share price indices over the individual national share price indices irrespective of the test statistic used. Our results imply that formal harmonisation and integration of African stock markets may improve their informational efficiency.

• Item Type: MPRA Paper
• Language: English
• Keywords: Harmonisation and integration, Efficiency, Share price indices, Stock markets, Africa
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing ; Futures Pricing; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

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