A Semi-Strong Form Test of Emerging Market Efficiency: Evidence to An African Stock Market

  • Serges Delon YOPA DJENGA University of Douala, Cameroon
  • Simplice Gael TONMO University of Dschang, Cameroon
  • Laurent NDJANYOU University of Yaoundé II Soa, Cameroon
Keywords: Stock market reaction, Event study, abnormal returns


Based on the semi-strong form tests of an Efficient Market Hypothesis (EMH) a market that adjusts rapidly to new information, this paper contributes to the existing literature by examining the way stock markets react to political news. Using the event study methodology, we assess the speed of stock price adjustment to nine political events that occurred in the West African Economic and Monetary Union (WAEMU) from 1999 to 2020 for a sample of 25 firms listed on this regional African Stock Market (ASM). News related to political events are analyzed because of their impact on stock prices. The abnormal returns are determined by using the multivariate regression model of Binder (1985) associated with EGARCH (1.1) modeling to reflect the asymmetric specification of events and changes in volatility over time. The graphical representation and statistical analysis of Average Abnormal Return (AAR), document the existence of Average Abnormal Return statistically significant and abnormal price reactions before the public announcement of political events. In economic terms, this might indicate that market agents receive or anticipate the information even before their effective disclosure to the public. Besides, the speed of stock price adjustment to political events is slow. These results are not consistent with EMH in its semi-strong form. In general, these findings estimate the scale of market reaction and its speed in an emerging market such as WAEMU Stock Exchange through its significant effects on asset pricing. Finally, these findings reinforce the role of political risk on financial markets in emerging economies and allow economic agents to outline strategies to predict stock return behavior during periods of political turmoil.



JEL classification: C32, G14, G15

Paper type: Empirical Research


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How to Cite
YOPA DJENGA, S. D., Gael TONMO, S., & NDJANYOU, L. (2022). A Semi-Strong Form Test of Emerging Market Efficiency: Evidence to An African Stock Market. International Journal of Accounting, Finance, Auditing, Management and Economics, 3(4-3), 21-41. https://doi.org/10.5281/zenodo.6901823