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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)

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.

Suggested Citation

  • A. Sabur Mollah, 2007. "Testing Weak-Form Market Efficiency In Emerging Market: Evidence From Botswana Stock Exchange," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 10(06), pages 1077-1094.
    • Handle: RePEc:wsi:ijtafx:v:10:y:2007:i:06:n:s021902490700455x
    DOI: 10.1142/S021902490700455X
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    References listed on IDEAS

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    1. Campbell R. Harvey, 1994. "Conditional Asset Allocation in Emerging Markets," NBER Working Papers 4623, National Bureau of Economic Research, Inc.
    2. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272, Decembrie.
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    Cited by:

    1. 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.
    2. Saker Sabkha & Christian Peretti & Dorra Hmaied, 2019. "On the informational market efficiency of the worldwide sovereign credit default swaps," Journal of Asset Management, Palgrave Macmillan, vol. 20(7), pages 581-608, December.
    3. 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.
    4. Kirwins Charles & Bruce Niendorf & Kristine Beck, 2013. "Efficiency Of The Eastern Caribbean Securities Exchange," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 7(5), pages 15-23.
    5. Laurel PASRICHA & Neelam DHANDA, 2022. "The past, the present and the prospective future of efficient market hypothesis: a theoretical and empirical investigation of international stock markets," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(631), S), pages 89-106, Summer.
    6. Alexandros E. Milionis, 2019. "A simple return generating model in discrete time; implications for market efficiency testing," Working Papers 259, Bank of Greece.
    7. 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.
    8. Erdas Mehmet Levent, 2019. "Validity of Weak-Form Market Efficiency in Central and Eastern European Countries (CEECs): Evidence from Linear and Nonlinear Unit Root Tests," Review of Economic Perspectives, Sciendo, vol. 19(4), pages 399-428, December.
    9. 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.
    10. Naimat U Khan & Sajjad Khan, 2016. "Weak Form of Efficient Market Hypothesis: Evidence from Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 8(SE), pages 1-18, March.

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