Abstract
The theory of the Efficient Market Hypothesis (EMH) has been debated extensively. In this study the runs test was employed on the Botswana Stock Exchange daily Domestic Companies and Foreign Companies indices to test whether the Botswana stock market follows the random walk process and subsequently determine weak-form market efficiency. The results of the runs test showed that the indices do not follow the random walk process. As a result the Botswana stock market is determined to be weak-form market inefficient and rejects the efficient market hypothesis accordingly.
Highlights
The efficient market hypothesis is a crucial hypothesis in the field of finance
This study finds that amongst the 8 countries, 7 rejected the Archives of Business Research (ABR)
AND DISCUSSIONS The runs test was applied on the two Botswana Stock Exchange (BSE) daily stock prices indices, the Domestic Companies Index (DCI) and the Foreign Companies Index (FCI), and the results are presented in Table 1 (Source of data for Table 1 can be found in Appendix A)
Summary
The efficient market hypothesis is a crucial hypothesis in the field of finance. It states that an efficient market is a market in which stock prices fully reflect available information, and that all new information is manifested in the prices (Fama, 1970). There is evidence that stock markets that adhere to the efficient market hypothesis tend to be those in economies with developed financial sectors, found mainly in developed countries (Smith, Jefferis, & Ryoo, 2002). Analysts are able to determine the degree of institutional maturity of a country’s financial sector through ascertaining the state of market efficiency in its capital markets
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
