Open AccessAfrican Stock Markets and Return Predictability
Author(s) -
Gyamfi Ne,
Kyei Ka,
Ryan Gill
Publication year - 2016
Publication title -
journal of economics and behavioral studies
Language(s) - English
Resource type - Journals
ISSN - 2220-6140
DOI - 10.22610/jebs.v8i5(j).1434
Subject(s) - predictability , heteroscedasticity , econometrics , economics , stock (firearms) , efficient market hypothesis , stock market , arbitrage , financial economics , market efficiency , conditional expectation , mathematics , statistics , engineering , geography , mechanical engineering , context (archaeology) , archaeology
This article re-examines the return predictability of eight African stock markets. When returns of stocks are predictable, arbitrageurs make abnormal gains from analyzing prices. The study uses a non-parametric Generalised Spectral (GS) test in a rolling window approach. The rolling window approach tracts the periods of efficiency over time. The GS test is robust to conditional heteroscedasticity and it detects the presence of linear and nonlinear dependencies in a stationary time series. Our results support the Adaptive Market Hypothesis (AMH). This is because, indices whose returns were observed to be predictable by analyzing them in absolute form and therefore weak - form inefficient showed trends of unpredictability in a rolling window.