Stock Market Efficiency in Frontier Capital Markets: Testing Weak form Efficiency of the Dar es Salaam Stock Exchange

Kayumbe, January R. L. (2017) Stock Market Efficiency in Frontier Capital Markets: Testing Weak form Efficiency of the Dar es Salaam Stock Exchange. Masters thesis, The Open University of Tanzania.

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Abstract

The purpose of the study was to test the weak-form efficiency of the Dar es Salaam Stock Exchange (DSE). Data used include the daily stock prices of four of the indices of the Exchange for the period from December 2006 to December 2012 and 2015 for one of the indices. The four indices are Dar es Salaam Stock Exchange Index (DSEI) which covers both domestic and foreign companies, Tanzania Share Index (TSI) which excludes foreign companies, Industry and Allies Index (IA) and Banking and Insurance Index (BI). Autocorrelation and Runs tests were used to achieve the study objective. The study finds evidence of significant autocorrelation in the share return series at different lags. Similarly,the findings from runs tests revealed that share returns series do not follow random walk theory. Thus, both tests reject the null hypothesis of weak-form market efficiency. This implies that knowledgeable market participants might be able to design trading rules based on the past data and be able to achieve superior returns. It is hereby recommended that the DSE needs to improve on a number of fronts including creating appetite for public and private companies to list, increase liquidity, improve on information flows which is timely released and observe accuracy, extended use of ICT and accommodation of more products. Wider information sharing with investing public need not be overemphasised. Keywords: Frontier markets, Dar es Salaam Stock Exchange, efficient market hypothesis, random walk hypothesis, Autocorrelation test, Runs test

Item Type: Thesis (Masters)
Subjects: 300 Social Sciences > 330 Economics
Divisions: Faculty of Business Management > Department of Accounting and Finance
Depositing User: Mr Habibu V. Kazimzuri
Date Deposited: 01 Mar 2017 08:05
Last Modified: 23 May 2017 09:43
URI: http://repository.out.ac.tz/id/eprint/1741

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