A Test of the Weak Form Efficiency of the Zimbabwe Stock Exchange After Currency Reform

Mazviona, Batsirai Winmore (2013) A Test of the Weak Form Efficiency of the Zimbabwe Stock Exchange After Currency Reform.

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Official URL: http://ir.nust.ac.zw/xmlui/handle/123456789/592

Abstract

The Zimbabwean dollar lost its value and purpose as a medium of exchange as a result of the hyper inflation which had its greatest impact on the Zimbabwean economy between 2007 and 2008. The introduction of the multi-currency system, which entails the use of various foreign currencies to transact, resulted in the Zimbabwe Stock Exchange (ZSE) adopting the United States dollar (USD) as its main currency. The researchers investigated the weak form efficiency of the ZSE after introduction of the multi-currency system by testing if it is possible to create an excess return by the use of technical trading rules. According to the efficient market hypothesis (EMH) and the random walk theory, in an efficient market it is not possible to predict the future stock prices by analysing historical stock prices. The profitability of technical analysis and technical trading rules has been researched and debated extensively, but researchers are yet to reach a consensus. This article focuses exclusively on the ZSE. The purpose of this article is to test whether the ZSE exhibits weak form market efficiency. The data used to carry out the empirical study was obtained from the ZSE for the period 19 February 2009 to 28 June 2012. The efficiency of the ZSE is tested using the daily closing prices and indices over the aforementioned period. The data was then subjected to a number of tests namely auto-correlation, the runs test and the Q-statistic test. The results of the study provide evidence that the ZSE is not weak form efficient. This article adds to the existing body of knowledge and offers for the first time an investigation of the weak form efficiency on the ZSE following currency reform.

Item Type: Article
Uncontrolled Keywords: Zimbabwe stock exchange,Efficiency,Multi-currency
Divisions: Universities > State Universities > National University of Science and Technology
Depositing User: Mr. Edmore Sibanda
Date Deposited: 15 May 2017 23:00
Last Modified: 15 May 2017 23:00
URI: http://researchdatabase.ac.zw/id/eprint/4626

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