Are African Stock Markets Efficient? A Comparative Analysis Between Six African Markets, the UK, Japan and the USA in the Period of the Pandemic

Rui Dias, João M. Pereira, Luísa Cagica Carvalho


The aim of this study is to test and compare the efficient market hypothesis,
in its weak form, on the stock markets of Botswana, Egypt, Kenya, Morocco,
Nigeria, South Africa, Japan, the UK and the USA from 2 September 2019 to 2
September 2020. This study is based on the following research question: has
the global pandemic (COVID-19) reduced the efficiency – in its weak form – of
African financial markets compared to the mature markets of the UK, Japan and
the USA? The results sustain the evidence that the random walk hypothesis is not
supported by the financial markets analysed in the period of the global pandemic.
The variance ratio values are lower than the unit, which implies that the returns
are self-correlated over time. A reversion to the average is also observed, with
no differences identified between mature and emerging financial markets. In
corroboration, the Detrended Fluctuation Analysis (DFA) exponents show that the
financial markets present signs of (in)efficiency in its weak form, thus showing
persistence in the yields. This therefore implies the existence of long memories
validating the results of the variance using the Wright’s Rank and Signs Test
(2000), which prove the rejection of the random walk hypothesis.


African stock markets, efficient market hypothesis, mean reversion, random walk

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