Testing for the weak-form market efficiency of the Dar es Salaam Stock Exchange

Guney, Y.; Komba, G.

Abstract

This chapter investigates the weak-form efficiency of the Dar es Salaam Stock Exchange (DSE), a frontier market, in Tanzania. The study covers the period from Jan. 2007 to Dec. 2014. To establish the consistency and robustness of the obtained conclusions, we employ different tests (ie, augmented Dickey–Fuller test, variance ratio test, and ranks and signs test) to examine the hypothesis that the returns based on the price and return indices follow a random walk process. The results provide convincing evidence that returns series based on price indices indeed follow a random walk. However, when the same tests are performed for the returns based on the return indices, the findings reveal that these series are not weak-form efficient, suggesting that investors might be able to predict future returns based on the current and past data.

Citation

Guney, Y., & Komba, G. (2016). Testing for the weak-form market efficiency of the Dar es Salaam Stock Exchange. In P. Andrikopoulos, G. Gregoriou, & V. Kallinterakis (Eds.), Handbook of frontier markets: The European and African evidence (3-26). Elsevier Academic Press. https://doi.org/10.1016/b978-0-12-803776-8.00001-x

• Online Publication Date: Aug 12, 2016
• Publication Date: 2016
• Deposit Date: May 15, 2019
• Pages: 3-26
• Book Title: Handbook of frontier markets: The European and African evidence
• Chapter Number: 1
• ISBN: 9780128037768
• DOI: https://doi.org/10.1016/b978-0-12-803776-8.00001-x
• Keywords: Weak-form market efficiency; ADF; Variance ratio; Ranks and signs tests; Dar es Salaam stock market
• Public URL: https://hull-repository.worktribe.com/output/1788302
• Publisher URL: https://www.sciencedirect.com/science/article/pii/B978012803776800001X