Are African Stock Markets Inefficient? New Evidence on Seasonal Anomalies

Lobão Júlio ()
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Lobão Júlio: School of Economics and Management, University of Porto, Portugal

Scientific Annals of Economics and Business, 2018, vol. 65, issue 3, 283-301

Abstract: It is widely acknowledged that having efficient financial markets is paramount in the allocation of social resources to their most productive uses. This paper explores the informational efficiency of six of the most important African stock markets for indication of seasonal predictability in stock returns. The results reveal that all markets exhibited some kind of seasonal patterns. The prevalence of the phenomenon was higher in the Egyptian and Tunisian markets, suggesting the presence of inefficient prices. Surprisingly, the only advanced emerging market of the sample (South Africa) showed a relatively large number of anomalies. This paper also reports the existence of strong pre-holiday effects and turn-of-the-month effects in most of the markets under scrutiny. Moreover, this study is the first to document the presence of quarterly effects in African markets. Collectively, the evidence obtained highlights the opportunity for arbitrageurs to reap profits as well as the need of decision-makers to implement legal and regulatory reforms in the markets of the continent.

Keywords: Africa; market efficiency; stock markets; seasonal anomalies (search for similar items in EconPapers)
JEL-codes: G11 G14 G15 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:aicuec:v:65:y:2018:i:3:p:283-301:n:8

DOI: 10.2478/saeb-2018-0023

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