African Stock Markets: Efficiency and Relative Predictability

The weak form of the efficient markets hypothesis is tested for eight African stock markets using three finite-sample variance ratio tests. A rolling window captures short-horizon predictability, tracks changes in predictability and is used to rank markets by relative predictability. These stock markets experience successive periods when they are predictable and then not predictable; this is consistent with the adaptive markets hypothesis. The degree of predictability varies widely: the least predictable African stock markets are those located in Egypt, South Africa and Tunisia, while the most predictable are in Kenya, Zambia and Nigeria.