Market Efficiency of the Ethiopia Commodity Exchange: The Case of Export Coffee Trading
| dc.contributor.advisor | Ageba, Gebrehiwot (Associate Professor) | |
| dc.contributor.author | Hussein, Abdurezack | |
| dc.date.accessioned | 2018-06-21T07:59:50Z | |
| dc.date.accessioned | 2023-11-04T10:28:27Z | |
| dc.date.available | 2018-06-21T07:59:50Z | |
| dc.date.available | 2023-11-04T10:28:27Z | |
| dc.date.issued | 2010-11 | |
| dc.description.abstract | Despite the pivotal role of agriculture in the Ethiopian economy, the sector’s development is highly constrained by infrastructural and institutional problems. To tackle part of the institutional problem, spot-trading Ethiopia Commodity Exchange (ECX) was established with a vision to revolutionize the country’s agriculture through an efficient, dynamic, forward-looking and orderly marketing system. This thesis is probably the first of its type to study the market efficiency of the ECX in trading its major commodity, namely export coffee. The Efficient Market Hypothesis (EMH) is widely used in market efficiency studies. This thesis tested the weak form of EMH using the ADF, the Lo-MacKinlay variance ratio and the BDS tests for random walk to study the price formation behavior of washed and unwashed export coffees traded in the exchange for 16 months. The post estimation tests on the ADF regression showed that ADF is inappropriate to use for the purpose for the study. The test for normality of observations also showed that parametric tests for random walk are not appropriate to study most of the prices series. The results from the non-parametric Variance Ratio and BDS tests, however, consistently showed that there are both linear and non-linear dependencies in the price series of both commodities and there is no observable trend towards efficiency. To further strength the results, the Spearman’s Rank Correlation coefficient results have supported the presence of a persistent and strong dependencies in the price series. The result thus entails that, within the study period, ECX is weak-form inefficient and there is possibilities of taking trading position that potentially offer traders excess profit using the predictability in the price series. The result, however, is not surprising given the presence of price band limits, the infancy of the Exchange and most importantly the nature of the trading (spot-based) in ECX. To address the market efficiency problem and other crucial issues, the Exchange has to shift to futures based trading. As such shifts cannot be made overnight, some measures are recommended that can be implemented alongside the institutional development process in order to make the existing system a more efficient one. | en_US |
| dc.identifier.uri | http://etd.aau.edu.et/handle/123456789/2591 | |
| dc.language.iso | en | en_US |
| dc.publisher | Addis Ababa University | en_US |
| dc.subject | Economic Policy Analysis | en_US |
| dc.title | Market Efficiency of the Ethiopia Commodity Exchange: The Case of Export Coffee Trading | en_US |
| dc.type | Thesis | en_US |