Investigating the semi-strong efficiency in Namibia’s foreign exchange market

Abstract

This paper analyses the semi-strong form efficiency of the foreign exchange market in Namibia using three bilateral exchange rates. The semi-strong form efficiency was examined using the cointegration test and Granger causality test. The study applied these tests on the monthly nominal spot exchange rate data for the period between the years 1993 and 2011. The results from the study indicated that semi-strong form efficiency was evident within Namibia’s foreign exchange market. This suggests that historical data cannot be used to predict current and future market prices. The semi-strong form efficiency on the Namibia stock market is attributable to its correlation with the Johannesburg Stock Exchange. Furthermore, the results should be interpreted with caution; in light of thin trading which has been identified as a problem for Namibia’s financial markets attributable to dual-listing of stocks