Stock Market Efficiency in Africa: Evidence From Random Walk Hypothesis

Abstract

This paper aims to test the efficient market hypothesis, in its weak form, in the stock markets of BOTSWANA, EGYPT, KENYA, MOROCCO, NIGERIA and SOUTH AFRICA, in the period from September 2, 2019 to September 2, 2020. In order to achieve this analysis, we intend to find out if: the global pandemic (Covid-19) has decreased the efficiency, in its weak form, of African stock markets? The results therefore support the evidence that the random walk hypothesis is not supported by the financial markets analyzed in this period of global pandemic. The values of variance ratios are lower than the unit, which implies that the yields are autocorrelated in time and, there is reversal to the mean, and no differences were identified between the stock markets analyzed. The authors consider that the results achieved are of interest to investors looking for opportunities for portfolio diversification in these regional stock markets.

ESG Indices Efficiency in Five MENA Countries: Application of the Hurst Exponent

“… Hypothesis 1: ESG and conventional indices are efficient We found that Moroccan financial indices are inefficient, with an exponent of 0.62352 for the MASI and 0.61844 for the Casa ESG 10 sustainability index. This finding is consistent with the results of Rejichi and Aloui (2012), Dias andSantos (2020), andSmith et al (2002).…”

“…It is also the case for the Egyptian sustainability index (EGX S & P) (exponent of 0.63747). These results align with the results of Al-Jafari and Abdulkadhim Altaee (2011), Dias andSantos (2020), andSmith et al (2002). Al-Jafari and Abdulkadhim Altaee (2011) studied efficiency in the Egyptian stock market using several approaches including unit root test, run test, and variance ratio tests.…”

“…On the other hand, few studies focus on analyzing the persistence of ESG indices by investigating their degree of efficiency against conventional indices. These have been the subject of several empirical tests of their effectiveness (Smith et al, 2002;Manescu, 2010;Onali & Goddard, 2011;Rejichi & Aloui, 2012;Sensoy & Tabak, 2015;Mynhardt et al, 2017;Dias & Santos, 2020;Vadithala & Tadoori, 2021;Caporale et al, 2022;Bofinger et al, 2022;Wu et al, 2022).…”

“…The implications of the study reject the random walk hypothesis in the majority of African financial markets, with the exception of the South African stock market that follows a random walk. In the same context, and using unit root tests, Dias and Santos (2020) tested the weak form of the efficiency hypothesis in the financial markets of Morocco, Botswana, Egypt, Kenya, Nigeria, and South Africa during the Covid-19 health crisis. The results show that these financial markets are not efficient.…”

International Scientific Conference EMAN – Economics and Management: How to Cope with Disrupted Times

“…In another way, the prices of securities that are traded in an efficient financial market reflect all available information and adjust fully and quickly to new information. In addition to the assumption that the information available in the market is free Dias et al, , 2022Dias and Santos, 2020;Vasco et al, 2021).…”