oa Journal of Economic and Financial Sciences - Testing weak form efficiency in the South African market

Volume 8, Issue 2
  • ISSN : 1995-7076



This paper furthers the work on efficiency of developing markets with specific focus on the JSE Limited. Empirical work on the efficiency of the JSE has been mixed; evidence both in favour of and against weak form efficiency is prominent. If markets are efficient new information immediately influences market prices; accordingly, prices follow a random walk and investors will not be able to continuously earn abnormal returns. Both the Augmented Dickey-Fuller and Phillips-Perron tests were employed to test whether the JSE followed a random walk between 1999 and 2014. The null hypothesis (H) for both tests is that the series of logarithmic returns has a unit root and is therefore weak form efficient. In both tests this H is rejected, which proves that for the period under analysis the JSE was not weak form efficient. The influence of factors such as market size and liquidity on efficiency is also discussed.

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