Assessing the Efficiency and Persistence of African Stock Markets through DEA Score: Evidence from COVID-19 Pandemic

The few studies on COVID-19’s impact on stock market efficiency have reached mixed conclusions. However, the findings lean towards a negative impact, no studies have assessed market efficiency when returns increase in the existing capacity of COVID-19 cases, exchange rates and inflation rates. This study uses data envelopment analysis (DEA) and the DEA-adjusted estimator. We finally adopt the cross and time product ratios to determine the persistence of stock market efficiency. We find that the COVID-19 pandemic severely impacted the efficiency of African stock markets in 2021 and that the efficiency of African stock markets persists only in the short run. These findings are relevant to investors seeking to diversify their portfolios during pandemics and to regulators of African stock markets. Global investors should diversify their portfolios with African stock markets to mitigate the impact of pandemics on their investments. To reap the benefits of diversification, investors should invest in efficient African markets during pandemics and sell stocks in inefficient markets in the short run. In addition, regulators of African stock markets should adopt technologies that aid in the flow of information among investors.