How Efficiently Can Infant Stock Markets Exhibit the Random Walk? Evidence From Malawi

Joseph Paul Chunga and Yu Ping

International Journal of Economics and Finance, 2023, vol. 15, issue 5, 26

Abstract: It is no secret that the Malawi Stock Exchange (MSE) is still in its infancy. In 2011, the Malawi government in conjunction with the World Bank launched the Financial Sector Technical Assistance Project (FSTAP). The project targeted an improvement in financial literacy and also the automation of trading on the MSE to an advanced stage so as to improve market efficiency. This paper investigated the weak form and semi-strong efficient market hypotheses on the Malawi Stock Market in the wake of such a project with aid of parametric and non-parametric tests. The weak form efficiency of the market is tested by the application of Lo and MacKinlay’s Variance ratio test, the Cumby-Huizinga autocorrelation test and the Phillips-Perron unit root test. An adjustment to the methodology suggested by Borges (2009) is employed to ascertain the presence of market anomalies and by extension test out semi-strong form of efficiency. The paper employed more recent and comprehensive data stretching back to January 2010 through to June, 2022, amounting to 12years and 6months. Results are in support of weak form efficiency. However, the paper found significant evidence against semi-strong efficiency of the MSE. Calendar effects like day-of-the-week effect and turn-of-the-year effect were deemed to be absent from the market but turn-of-the-month effect was existent. Results of applying the Fama and French three-factor model to a time series regression reveal the presence of size and value effects. As such, the paper concludes that the Malawi Stock Market is weak-form efficient but semi-strong inefficient.

Date: 2023
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ccsenet.org/journal/index.php/ijef/article/download/0/0/48575/52294 (application/pdf)
https://ccsenet.org/journal/index.php/ijef/article/view/0/48575 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:15:y:2023:i:5:p:26

Access Statistics for this article

More articles in International Journal of Economics and Finance from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education ().