Evaluation of Weak-Form Efficient Market Hypothesis in Zimbabwe Stock Exchange during Pandemic Period

Stock markets, just like other sectors of businesses have been impacted by the COVID-19 pandemic. COVID-19 has caused things to change in some sort; behavior, culture, and economy. Investors’ behavior and expectations may have been shaken. Huge stock market dislocations may have occurred as individual and institutional investors react to bad economic news. This paper evaluated the Zimbabwe Stock Exchange (ZSE) for evidence of a weak-form efficient market hypothesis in the context of a random walk model for the pandemic period. The study used low-frequency data (monthly) from January 2020 to February 2022 for its analysis. The study employed autocorrelation tests, unit root test runs tests, and variance ratio tests. The study found that the autocorrelation tests run tests and the variance ratio tests failed to reject the random walk hypothesis, while the unit root test have opposite results. Given that the variance ratio test is more powerful than the unit root test and that unit root tests have very poor power properties, the study concludes that the ZSE followed a random walk during the pandemic period. The study, however, believes that the efficiency of the stock market may have been attributed to inflation problems during the period. As inflation sours, the revenue growth becomes of nominal terms not real terms, hence actual returns in real terms become meaningless in the financial trade. The study recommended further development of the stock market to resemble those of developed markets with various trading products, greater participation, automation, and capitalization