TEST OF RANDOM WALK ON SELECTED STOCK MARKETS IN AFRICA

Анотація

This study investigated the efficiency market theory in four (4) selected African stock markets (Nigeria, South Africa, Kenya and Morocco) proxied by their All-share indices from the perspective of random walk hypothesis using the variance ratio tests. Daily market returns data from 01/02/2012 to 26/03/2020 obtained from the individual national stock markets via their official websites was employed. The findings of the study evince that over the study period, the daily returns movement on Nigeria stock exchange All-share index is affected by historical price information; hence, Nigeria stock market follows the random walk pattern whereas the daily returns movement on South Africa FTSE-JSE stock exchange index, Kenya (Nairobi) stock exchange index and Morocco (Casablanca) stock exchange index are not affected by historical price information; hence, South Africa, Kenya and Morocco stock markets do not follow the random walk pattern. We therefore conclude that African stock markets are largely inefficient; hence, they are characterized by market anomalies and momentum effects implying that financial resources are not efficiently and effectively mobilized. Also, there is lack of evidence of weak form efficiency in African markets which also implies the existence of arbitrage opportunities which would lead to abnormal returns or profits if well exploited. From the findings of this study, we recommend amongst others that there is need for investors and traders in the African stock markets to exploit the existing arbitrage opportunities that are created by market anomalies in order to possibly beat the stock markets and earn abnormal returns. This can be achieved by using market trading strategies that are consistent with technical analysis such as day-of-the week momentum strategy.

Класифікація

Ідентифікатори

Схожі роботи