A Test of Weak Form Efficiency for the Botswana Stock Exchange (2004- 2008)
Oscar Chiwira, Brian Muyambiri
Journal of Economics, Management and Trade · pp. 83–91 · Published 19 Mar 2012
10.9734/BJEMT/2012/1071Abstract
Aim: This study aims to evaluate the presence of weak form efficiency in the Botswana Stock Exchange (BSE) using a number of methods that specifically assess the Random Walk Model. Study Design: Multi-model econometric study. Place and Duration of Study: Botswana, Gaborone, between December 2011 and January 2012. Methodology: The study uses a number of tests to examine the randomness of the BSE stock prices. The testing methods used are the Augmented Dickey Fuller tests, autocorrelation test, Kolmogorov-Smirnov Test, Runs Test and the Phillips Perron unit root test. The methodology was adopted because it mixed both parametric and nonparametric tests. All the tests are investigated on weekly and monthly All Company Index (ACI) data for the period 2004 to 2008. Results: All the tests show that the BSE is inefficient at the weak-form and that there is need for a number of adjustments to improve its efficiency. Conclusion: The random Walk hypothesis is rejected implying that experienced investment analysts have an advantage of outperforming the market and hence make higher than expected profits through the use of historical data.
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