Rui Dias –School of Business and Administration, Polytechnic Institute of Setรบbal, Portugal and CEFAGE-UE, IIFA, University of รvora, Portugal
Hortense Santos – School of Business and Administration, Polytechnic Institute of Setรบbal, Portugal
DOI: https://doi.org/10.31410/LIMEN.2020.25
6th International Scientific-Business Conference – LIMEN 2020 – Leadership, Innovation, Management and Economics: Integrated Politics of Research – CONFERENCE PROCEEDINGS, Online/virtual, November 26, 2020, published by the Association of Economists and Managers of the Balkans, Belgrade; Printed by: SKRIPTA International, Belgrade, ISBN 978-86-80194-39-4, ISSN 2683-6149, DOI: https://doi.org/10.31410/LIMEN.2020
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.
Keywords
Random walk, Africa stock markets, Portfolio diversification.
References
Abakah, E. J.A. et al. (2018) ‘Non-linear approach to Random Walk Test in selected African countries’, International Journal of Managerial Finance. doi: 10.1108/IJMF-10-2017-0235.
Aggarwal, D. (2018) ‘Random walk model and asymmetric effect in Korean composite stock price index’, Afro-Asian J. of Finance and Accounting. doi: 10.1504/aajfa.2018.10009906.
Alexandre, P., Dias, R. and Heliodoro, P. (2020) ‘EUROPEAN FINANCIAL MARKET INTEGRATION: A CLOSER LOOK AT GOVERNMENT BONDS IN EUROZONE COUNTRIES’, Balkans Journal of Emerging Trends in Social Sciences. doi: 10.31410/balkans.jetss.2020.3.1.78-86.
Alexandre, P., Heliodoro, P. and Dias, R. (2019) ‘THE CONTAGION EFFECT IN EUROPE: A DCC GARH APPROACH’, in 5th LIMEN Conference Proceedings (part of LIMEN conference collection). doi: 10.31410/limen.2019.73.
Breitung, J. (2000) ‘The local power of some unit root tests for panel data’, Advances in Econometrics. doi: 10.1016/S0731-9053(00)15006-6.
Clemente, J., Montaรฑรฉs, A. and Reyes, M. (1998) ‘Testing for a unit root in variables with a double change in the mean’, Economics Letters, 59(2), pp. 175โ182. doi: 10.1016/S0165-1765(98)00052-4.
Dias, R., Heliodoro, P., et al. (2020a) ‘FINANCIAL MARKET INTEGRATION OF ASEAN-5 WITH CHINA: AN ECONOPHYSICS APPROACH’, in 4th EMAN Conference Proceedings (part of EMAN conference collection). doi: 10.31410/eman.2020.17.
Dias, R., Sparrow, P., et al. (2020) ‘Financial Market Integration of ASEAN-5 with China’, Littera Scripta. doi: 10.36708/littera_scripta2020/1/4.
Dias, R., Heliodoro, P., et al. (2020b) ‘THE SHOCKS BETWEEN OIL MARKET TO THE BRIC STOCK MARKETS: A GENERALIZED VAR APPROACH’, in 4th EMAN Conference Proceedings (part of EMAN conference collection).
Dias, R., Alexandre, P. and Heliodoro, P. (2020) ‘Contagion in the LAC Financial Markets: The Impact of Stock Crises of 2008 and 2010’, Littera Scripta. doi: 10.36708/littera_scripta2020/1/3.
Dias, R., Heliodoro, P. and Alexandre, P. (2019) ‘RISK TRANSMISSION AMONG STOCK MARKETS IN LAC REGION: FINANCIAL CRISES IMPACT’, in 5th LIMEN Selected Papers (part of LIMEN conference collection). doi: 10.31410/limen.s.p.2019.91.
Dias, R., Heliodoro, P. and Alexandre, P. (2020) ‘Efficiency of Asean-5 Markets: An Detrended Fluctuation Analysis’, Mednarodno inovativno poslovanje = Journal of Innovative Business and Management. doi: 10.32015/jibm.2020.12.2.13-19.
Dias, R., da Silva, J. V. and Dionรญsio, A. (2019) ‘Financial markets of the LAC region: Does the crisis influence the financial integration?’, International Review of Financial Analysis. Elsevier, 63(January), pp. 160โ173. doi: 10.1016/j.irfa.2019.02.008.
Hawaldar, I. T., Rohith, B. and Pinto, P. (2020) ‘Testing of Weak Form of Efficient Market Hypothesis: Evidence from the Bahrain Bourse’, SSRN Electronic Journal. doi: 10.2139/ssrn.3504485.
He, Q. et al. (2020) ‘The impact of COVID-19 on stock markets’, Economic and Political Studies. doi: 10.1080/20954816.2020.1757570.
Heliodoro, P. et al. (2020) ‘INTEGRATION IN BRIC STOCK MARKETS: AN EMPIRICAL ANALYSIS’, in 4th EMAN Selected Papers (part of EMAN conference collection). doi: 10.31410/eman.s.p.2020.33.
Heliodoro, P., Dias, R. and Alexandre, P. (2020) ‘FINANCIAL CONTAGION BETWEEN THE US AND EMERGING MARKETS: COVID-19 PANDEMIC CASE’, in 4th EMAN Selected Papers (part of EMAN conference collection). doi: 10.31410/eman.s.p.2020.1.
Jain, E. (2020) ‘Empirically testing weak form efficiency of Indian stock market: Pre and post demonetization’, International Journal of Scientific and Technology Research.
Karasiลski, J. (2020) ‘The Changing Efficiency of the European Stock Markets’, Annales Universitatis Mariae Curie-Skลodowska, sectio H โ Oeconomia. doi: 10.17951/h.2020.54.1.41-51.
Kelikume, I. (2016) ‘New evidence from the efficient market hypothesis for the Nigerian stock index using the wavelet unit root test approach’, The Journal of Developing Areas. doi: 10.1353/jda.2016.0041.
Lawal, A. I. et al. (2017) ‘Examining the Nigerian stock market efficiency: Empirical evidence from wavelet unit root test approach’, Journal of Applied Economic Sciences.
Lawal, A. I., Somoye, R. O. and Babajide, A. A. (2017) ‘Are African stock markets efficient? Evidence from wavelet unit root test for random walk’, Economics Bulletin.
Levin, A., Lin, C. F. and Chu, C. S. J. (2002) ‘Unit root tests in panel data: Asymptotic and finite-sample properties’, Journal of Econometrics. doi: 10.1016/S0304-4076(01)00098-7.
Lo, A. W. and MacKinlay, A.C. (1988) ‘Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test’, Review of Financial Studies. doi: 10.1093/rfs/1.1.41.
Obayagbona, J. and Igbinosa, S. O. (2015) ‘Test of Random Walk Hypothesis in the Nigerian Stock Market’, Current Research Journal of Social Sciences. doi: 10.19026/crjss.7.5220.
Rosenthal, L. (1983) ‘An empirical test of the efficiency of the ADR market’, Journal of Banking & Finance. North-Holland, 7(1), pp. 17โ29. doi: 10.1016/0378-4266(83)90053-5.
Sadat, A. R. and Hasan, M. E. (2019) ‘Testing Weak Form of Market Efficiency of DSE Based on Random Walk Hypothesis Model: A Parametric Test Approach’, International Journal of Accounting and Financial Reporting. doi: 10.5296/ijafr.v9i1.14454.
Sansa, N. A. (2020) ‘The Impact of the COVID-19 on the Financial Markets: Evidence from China and USA’, SSRN Electronic Journal. doi: 10.2139/ssrn.3567901.
Simons, D. and Laryea, S. (2006) ‘Testing the Efficiency of Selected African Stock Markets’, Finance India. doi: 10.1.467.7105.
Smith, G., Jefferis, K. and Ryoo, H. J. (2002) ‘African stock markets: Multiple variance ratio tests of random walks’, Applied Financial Economics. doi: 10.1080/09603100010009957.
Tweneboah, G., Owusu, P. and Oseifuah, E. K. (2019) ‘Integration of major African stock markets: Evidence from multi-scale wavelets correlation’, Academy of Accounting and Financial Studies Journal.
