Testing for the Weak-Form Market Efficiency of the Dar Es Salaam Stock Exchange

Forthcoming: Handbook of Frontier Markets, 2016, (eds.) P. Andrikopoulos, V. Kallinterakis and G.N. Gregoriou, Elsevier.

31 Pages Posted: 28 Oct 2015

See all articles by Yilmaz Guney

Yilmaz Guney

University of Hull

Gabriel Komba

Mzumbe University, School of Business

Date Written: October 21, 2015

Abstract

This paper investigates into the weak-form efficiency of the Dar es Salaam stock exchange (DSE), a frontier market, in Tanzania. The study covers the period from January 2007 to December 2014. To establish the consistency and robustness of the obtained conclusions, we employ different tests (i.e., Augmented Dickey-Fuller test, Variance-ratio test, and Ranks and Sign 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.

Keywords: Weak form market efficiency, ADF, Variance ratio, Ranks and Sign test, Tanzanian stock market

JEL Classification: C14, G14

Suggested Citation

Guney, Yilmaz and Komba, Gabriel, Testing for the Weak-Form Market Efficiency of the Dar Es Salaam Stock Exchange (October 21, 2015). Forthcoming: Handbook of Frontier Markets, 2016, (eds.) P. Andrikopoulos, V. Kallinterakis and G.N. Gregoriou, Elsevier. . Available at SSRN: https://ssrn.com/abstract=2677325

Yilmaz Guney (Contact Author)

University of Hull ( email )

Hull, HU6 7RX
United Kingdom

HOME PAGE: http://https://www.hull.ac.uk/faculties/fblp/hubs.aspx

Gabriel Komba

Mzumbe University, School of Business ( email )

P.O.Box 6, Mzumbe
Morogoro
Tanzania

HOME PAGE: http://www.mzumbe.ac.tz

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