Testing the Efficiency of African Markets

Download or read book Testing the Efficiency of African Markets written by Daniel N. Simons and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we employ various tests to investigate the weak form of the efficient market hypothesis for four African stock markets - Ghana, Mauritius, Egypt and South Africa. The results of both parametric and non-parametric tests show that the South African stock market is weak form efficient, whereas that of Ghana, Mauritius and Egypt are weak form inefficient. This implies that successive security returns on the South African market are independent and follow a random walk. The same cannot be said of the other three markets. Consequently, we also fitted an ARIMA model to the excess return data for Ghana, Mauritius and Egypt using the Box-Jenkins method. The ARIMA models are then used to generate one-period ahead forecasts for the subsequent 12 periods for these three countries. The ARIMA forecasts in all three countries outperformed the naïve model, corroborating our initial inefficiency results from the earlier tests.