Return predictability in African stock markets

This paper models weekly index returns adjusted for thin trading as a nonlinear autoregressive process with conditional heteroscedasticity to investigate the weak-form pricing efficiency of 11 African stock markets. Specifically, the use of the EGARCH-M model allows us to capture how conditional vol...

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Veröffentlicht in:Review of financial economics 2003, Vol.12 (3), p.247-270
Hauptverfasser: Appiah-Kusi, Joe, Menyah, Kojo
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Menyah, Kojo
description This paper models weekly index returns adjusted for thin trading as a nonlinear autoregressive process with conditional heteroscedasticity to investigate the weak-form pricing efficiency of 11 African stock markets. Specifically, the use of the EGARCH-M model allows us to capture how conditional volatility affects the pricing process without imposing undue restrictions on the parameters of the conditional variance equation. On the basis of such a robust model, we are able to reject the evidence in prior studies that the Nigerian stock market is weak-form efficient. On the other hand, we confirm extant results that the markets in Egypt, Kenya, and Zimbabwe are efficient while that of South Africa is not weak-form efficient. We also generate new results, which point to the efficiency of the stock markets in Mauritius and Morocco, while the markets in Botswana, Ghana, Ivory Coast, and Swaziland are not consistent with weak-form efficiency.
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subjects African stock markets
Economic models
Economic theory
Efficiency
EGARCH-M
Emerging markets
Forecasting techniques
G15
G18
Nonlinearity
Return on investment
Securities analysis
Securities markets
Stock exchanges
Studies
Weak-form efficiency
title Return predictability in African stock markets
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