The efficient market hypothesis: Evidence from ten African stock markets

Chipo Mlambo and Nicholas Biekpe

MPRA Paper from University Library of Munich, Germany

Abstract: The paper investigates the weak-form efficiency of ten African stock markets using the runs test methodology for serial dependency. Returns are calculated using the adjusted trade-to-trade approach. Serious thin-trading was observed on all markets, and more so for Namibia and Botswana, the two markets with significant dual-listed stocks on the JSE. In many of the markets studied, a significant number of stocks rejected the random walk. Only three markets, Namibia, Kenya and Zimbabwe, were found to be relatively weak form efficient. The result for Namibia is attributed to its correlation with the JSE. Kenya and Zimbabwe are much older than most of the other markets studied. All the stocks in the Mauritian sample rejected the random walk at the 1% level of significance using the runs test and is thus said to be weak form inefficient. The same conclusion is reached for Ghana, the BRVM, Egypt and Botswana. Thus the possibility of profiting by trading on historical prices could not be entirely ruled out.

Keywords: Market efficiency; African stock markets; random walk; thin trading (search for similar items in EconPapers)
JEL-codes: G14 N27 O16 (search for similar items in EconPapers)
Date: 2007, Revised 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published in Investment Analysts Journal 66 (2007): pp. 5-18

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