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Market efficiency in developing African stock markets: what do we know?

Author

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  • Pyemo N. Afego

    (University of Dundee, UK)

Abstract

In the late 1980s, many countries in Africa established national stock exchanges with a view to foster financial development and economic growth. This paper provides a survey and synthesis of the extant literature on the efficiency of African equity markets (AEMs). It explores the path of development of stock markets in Africa with an emphasis on their efficiency, trends in performance, and developmental challenges. We find that much of the research into the efficiency of AEMs has focused on weak-form efficiency and the results, though mixed, lean towards rejection of the weak-form efficiency. We also find that the empirical literature has ignored the role of behavioral biases in the analyses of market efficiency, and has treated efficiency as static over different stages of market development. Finally, considering the traditionally small size of most AEMs, increased harmonization and integration of the various national exchanges may improve the informational efficiency and depth of AEMs.

Suggested Citation

  • Pyemo N. Afego, 2015. "Market efficiency in developing African stock markets: what do we know?," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(1), pages 243-266, January-M.
    • Handle: RePEc:jda:journl:vol.49:year:2015:issue1:pp:243-266
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    File URL: http://muse.jhu.edu/journals/journal_of_developing_areas/v049/49.1.afego.html
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    Citations

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    Cited by:

    1. Prince Dubois HIKOUATCHA KENFACK, 2018. "determinants of Illiquidity on emerging stock markets:," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 9(2), pages 2-19, December.
    2. Klagge Britta & Zademach Hans-Martin, 2018. "International capital flows, stock markets, and uneven development: the case of Sub-Saharan Africa and the Sustainable Stock Exchanges Initiative (SSEI)," ZFW – Advances in Economic Geography, De Gruyter, vol. 62(2), pages 92-107, May.
    3. Gyamfi NE & Kyei KA & Gill R, 2016. "African Stock Markets and Return Predictability," Journal of Economics and Behavioral Studies, AMH International, vol. 8(5), pages 91-99.
    4. Adedoyin Isola Lawal & Russel O Somoye & Abiola Ayopo Babajide, 2017. "Are African stock markets efficient? Evidence from wavelet unit root test for random walk," Economics Bulletin, AccessEcon, vol. 37(4), pages 2665-2679.
    5. Massoud Metghalchi & Linda A. Hayes & Farhang Niroomand, 2019. "A technical approach to equity investing in emerging markets," Review of Financial Economics, John Wiley & Sons, vol. 37(3), pages 389-403, July.
    6. Prince Dubois HIKOUATCHA KENFACK, 2018. "the determinants of Illiquidity on emerging stock markets:," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 9(2), pages 2-19, December.
    7. Emmanuel Numapau Gyamfi & Kwabena A Kyei & Ryan Gill, 2016. "Stationarity of African Stock Markets under an ESTAR framework," EuroEconomica, Danubius University of Galati, issue 2(35), pages 93-101, November.
    8. Babarinde rene ADEROMOU & Mahmoudou Bocar SALL, 2019. "Minority investor protection and corporate governance practices," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 10(2), pages 102-117, December.
    9. Goodell, John W. & Kumar, Satish & Rao, Purnima & Verma, Shubhangi, 2023. "Emotions and stock market anomalies: A systematic review," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    10. Babarinde rene ADEROMOU & Mahmoudou Bocar SALL, 2019. "The Minority investor protection and corporate governance practices," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 10(2), pages 102-117, December.
    11. Ferreira, Paulo & Dionísio, Andreia & Correia, José, 2018. "Non-linear dependencies in African stock markets: Was subprime crisis an important factor?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 505(C), pages 680-687.

    More about this item

    Keywords

    Efficient Markets Hypothesis; Market Efficiency; African Equity Markets;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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