Testing the Weak-Form Efficiency Market Hypothesis on the Ghana Stock Exchange: A Sectoral Analysis

Abstract

Testing the efficiency of the financial market is of much importance to investors who wish to hold diversifiable assets. This paper analysed the weak form market efficiency hypothesis for five sectors of the Ghana stock exchange using monthly returns of their respective stock market capitalisation as the information generating event. The paper investigated the weak form market efficiency in the framework of random walk hypothesis for the sectors of Ghana stock exchange by using the Run and the Lo-MacKinlay Variance Ratio tests. The results revealed that the sectors - consumer staples, financials and pharmaceuticals do not follow random walk and thus imply these sectors are not weak form efficient. The results also revealed contradictory results on the mining and the petroleum sectors, hence the issue of whether or not the random walk hypothesis holds for the two sectors is inconclusive.