Title: Do long-term foreign currency sovereign credit ratings positively affect bond and equity market efficiency in Africa?

Authors: Misheck Mutize; Sean J. Gossel

Addresses: Graduate School of Business, University of Cape Town, South Africa ' Graduate School of Business, University of Cape Town, South Africa

Abstract: This study investigates the weak-form efficiency of long-term foreign currency denominated bonds and stocks in incorporating long-term foreign currency sovereign credit rating announcements in 19 African countries over the period of 1994 to 2014. The results of Ljung-Box Q autocorrelation, runs and variance ratio tests find that sovereign credit ratings do not significantly impact bond market efficiency. In contrast, stock markets show evidence of weak form efficiency implying that long-term sovereign credit ratings positively affect equities market efficiency in Africa.

Keywords: efficiency; bond market; sovereign credit rating; SCR; stock market; Africa.

DOI: 10.1504/IJSE.2020.112307

International Journal of Sustainable Economy, 2020 Vol.12 No.4, pp.364 - 382

Received: 20 Dec 2019
Accepted: 18 Apr 2020
Published online: 07 Jan 2021 *

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