Random walks in frontier stock markets

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Periodical article

Title:	Random walks in frontier stock markets
Author:	McKerrow, Ryan
Year:	2013
Periodical:	Ghanaian journal of economics: a journal of the African Finance and Economics Consult (ISSN 2309-8945)
Volume:	1
Pages:	87-103
Language:	English
Geographic terms:	Botswana Ivory Coast - Côte d'Ivoire Ghana Mauritius Namibia
Subjects:	financial market prices
External link:	https://journals.co.za/doi/10.10520/EJC169508
Abstract:	The efficient markets hypothesis (EMH) posits that current stock prices (returns) are uncorrelated with past stock prices (returns). This means that a price change occurring today must be solely the product of today's news and thus independent of any prior news. With daily news being unpredictable, prices follow a random walk. The result is that speculative investors will be unable to profit from the exploitation of exclusive market knowledge. This paper tests the validity of the random walk model and, by extension, the weak form efficiency of the frontier markets of Botswana, Cote d'Ivoire, Ghana, Mauritius and Namibia. The study fills an existing gap created by a lack of empirical investigation into the efficiency of these markets in recent years. Data on broad-based equity indices are applied and the naïve random walk, the runs test and the multiple variance ratio test results demonstrate varying levels of efficiency when compared with the conclusions reached by existing studies. Bibliogr., sum. [Journal abstract]