High-Frequency Trading and Market Efficiency in the Moroccan Stock Market

El Mehdi Ferrouhi and Ibrahim Bouabdallaoui ()
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Ibrahim Bouabdallaoui: Mohammed V University in Rabat

A chapter in Big Data in Finance, 2022, pp 55-67 from Springer

Abstract: Abstract This chapter investigates the impact of high-frequency trading (HFT) on market efficiency in the Moroccan Stock Exchange. The endorsement of market efficiency suggests that investors cannot beat the market, while a rejection of market efficiency implies that investors can use HFT to realize higher returns than those of the market. We obtain data at the precision level of milliseconds from the Casablanca Stock Exchange and cover the period from August 1, 2016 (the beginning of high-frequency trading in the Moroccan stock market) to July 31, 2021. The chapter finds from conducting statistical analyses using this data that the market efficiency hypothesis is rejected at very high frequencies: one millisecond, one second, and 30 second. At lower time frequencies such as 1, 2, 5, 10, and 15 minutes, the market efficiency hypothesis is not rejected, which lends evidence that the market is efficient at these frequencies. Based on these results obtained, the main conclusion from this chapter is that investors with a faster market connection (at the millisecond and second level) and an efficient algorithm can use privileged information to realize returns higher than those of the Moroccan Stock Exchange market. Further studies should be completed in other markets to determine if these results are consistent across exchanges.

Keywords: High-frequency trading; Market efficiency; Moroccan stock exchange; Random walk hypothesis (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-12240-8_4

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DOI: 10.1007/978-3-031-12240-8_4

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