THE CHANGING EFFICIENCY OF AFRICAN STOCK MARKETS

  1. KEITH JEFFERIS1,
  2. GRAHAM SMITH2

Article first published online: 10 MAY 2005

DOI: 10.1111/j.1813-6982.2005.00004.x

Issue

South African Journal of Economics

South African Journal of Economics

Volume 73, Issue 1, pages 54–67, March 2005

Additional Information

How to Cite

JEFFERIS, K. and SMITH, G. (2005), THE CHANGING EFFICIENCY OF AFRICAN STOCK MARKETS. South African Journal of Economics, 73: 54–67. doi: 10.1111/j.1813-6982.2005.00004.x

Author Information

  1. 1

    Bank of Botswana

  2. 2

    Department of Economics, School of Oriental and African Studies, University of London

Publication History

  1. Issue published online: 10 MAY 2005
  2. Article first published online: 10 MAY 2005

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Keywords:

  • G14;
  • G15;
  • O16
  • African Stock Markets;
  • efficiency;
  • GARCH

Abstract

This paper classifies formal African stock markets into four categories and discuses the principal characteristics of the seven markets covered in this study: South Africa, Egypt, Morocco, Nigeria, Zimbabwe, Mauritius and Kenya. Using a GARCH approach with time-varying parameters, a test of evolving efficiency (TEE) is implemented for periods starting in the early 1990s and ending in June 2001. This test detects changes in weak form efficiency through time. The TEE finds that the Johannesburg stock market is weak form efficient throughout the period, and three stock markets become weak form efficient towards the end of the period: Egypt and Morocco from 1999 and Nigeria from early 2001. These contrast with the Kenya and Zimbabwe stock markets which show no tendency towards weak form efficiency and the Mauritius market which displays a slow tendency to eliminate inefficiency. The paper relates weak form efficiency to stock market turnover, capitalisation and institutional characteristics of markets.

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