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Testing Weak-Form Market Efficiency In Emerging Market: Evidence From Botswana Stock Exchange

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  • A. SABUR MOLLAH

    ()
    (Department of Accounting & Finance, Faculty of Business, University of Botswana, Private Bag UB 00701, Gaborone, Botswana)

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    Abstract

    Market efficiency is an area of enormous interest in financial literature. Numerous researchers conducted empirical studies in testing weak-form market efficiency in several stock markets and employed various techniques but the empirical evidence is controversial. Triangulation econometric approach is employed to assess the predictability of daily return series of Botswana Stock Exchange (BSE) and to test the null hypothesis of random walk model. The empirical results reject the null hypothesis of random walk model for the daily return series of BSE for the period of 1989–2005 and evidenced serial autocorrelation of return series, which clearly indicate predictability and volatility of security prices of Botswana market. However, the empirical evidence of both non-parametric (Kolmogrov–Smirnov: normality test and run test) and parametric test (Auto-correlation test, Auto-regressive model, ARIMA model) reject the hypothesis of random walk model and indeed violate the notion of weak-form market efficiency.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.

    Volume (Year): 10 (2007)
    Issue (Month): 06 ()
    Pages: 1077-1094

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    Handle: RePEc:wsi:ijtafx:v:10:y:2007:i:06:p:1077-1094

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    Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml

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    Related research

    Keywords: Weak-form market efficiency; emerging market;

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    Cited by:
    1. Majumder, Debasish, 2014. "Asset pricing for inefficient markets: Evidence from China and India," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(2), pages 282-291.
    2. Majumder, Debasish, 2013. "Towards an efficient stock market: Empirical evidence from the Indian market," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 572-587.
    3. Mensah, Justice T. & Pomaa-Berko, Maame & Adom, Philip Kofi, 2012. "Does Automation Improve Stock Market Efficiency? Evidence from Ghana," MPRA Paper 43642, University Library of Munich, Germany.
    4. Majumder, Debasish, 2012. "When the market becomes inefficient: Comparing BRIC markets with markets in the USA," International Review of Financial Analysis, Elsevier, vol. 24(C), pages 84-92.

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