Technical trading strategies, returns predictability and relative efficiency: evidence from selected African stock markets

We investigate the performance of several technical trading strategies in the stock markets of selected African economies and utilised the empirical evidence to rank the markets in terms of their efficiencies. The rationale for this study is simple: an asset whose historical prices fluctuate more randomly (relative to other assets) should offer lower profitable opportunities. Our momentum trading strategies (that also controlled for data snooping bias) generated significant number of profits for the Nigerian stock market, relative to the Egyptian and South African stock markets. We attributed our observation to the relationship between financial markets development and efficiency. Using our results, we ranked the South African stock market as relatively the most efficient, followed by the Egyptian and then the least efficient being the Nigerian market. We propose regular relative efficiency assessments across markets and regimes and discuss the benefits of such assessments to investors' and policymakers' decision making processes.