The Johannesburg Stock Exchange as an efficient market: A review

This paper reviews the accumulated empirical evidence on the efficiency of the Johannesburg Stock Exchange (JSE). the Efficient Market Hypothesis relates share price behaviour and information efficiency at three levels, weak form, semi-strong form and strong form. The evidence on the efficiency of the JSE is at best mixed, particularly regarding weak and semi-strong form efficiency. the evidence shows the JSE to be strong form inefficient, as shown by portfolio performance tests and insider trading tests. Given the mixed evidence, the issue is whether there is sufficient abnormal price behaviour to make it worthwhile for normal investors to seek superior returns. The research indicates that the JSE is operationally efficient and that most investors should simply buy and hold a well diversified portfolio.