A comparative study of the day of the week effect in the emerging and frontier markets in Africa
Date
2015-11
Authors
Waqo, Guyo Malicha
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
The study focuses on comparing the daily share prices of five major stock markets in Africa comprising of the emerging and frontier markets in Africa. The study uses daily share prices of stock market indices of Botswana, Kenya, Mauritius, Nigeria and South Africa over the period from October 20, 2014 to October 19, 2015. A regression based approach is employed to identify the existence of the day-of-the-week effect and the test of mean differences is used to compare the magnitude of the day of the week effect across the emerging and frontier markets. The results indicate that while all the African stock markets provide evidence of daily seasonality, the day-of-the-week effect is typically stronger in frontier markets. Specifically, a negative effect is observed for Monday while a positive effect occurs on Friday. The low level of observed daily seasonality in the stock markets of South Africa implies that the emerging market is weak form efficient, supporting the notion that the stock market development is accompanied by efficiency. The results have useful implications for international portfolio diversification. This may be of particular interest for the stock market authorities and the international investor.
Description
Submitted in partial fulfillment of the requirements for the Degree of Bachelor of Business Science in Financial Economics at Strathmore University
Keywords
Day of the week effect, Emerging markets, Frontier markets, Daily returns