Behavior of the North African Stock Markets: Validation of the Adaptive Market Hypothesis

This study aims to explore stock markets behavior in North African region by testing Adaptive Market Hypothesis (AMH) in the Tunisian and Moroccan stock market. We tested the predictability of daily returns for the TUNINDEX and the MASI from January 2002 to December 2018. In this paper, we applied two linear dependence tests (Automatic Variance and Automatic Portmanteau) and a nonlinear dependence test (Generalized Spectral) to capture time-varying efficiency of the Tunisian and Moroccan stock exchanges. Our results show that indexes return presents successive periods of predictability (inefficient) and unpredictability (efficient). We find that market efficiency varies depending on market conditions and each market interacts differently. This paper is the first study to consider a comparison between two north African markets and unlike most of the previous research, our study shows that these two markets are rather adaptive than inefficient.