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Weak Form Efficiency of the Nigerian Stock Market: An Empirical Analysis (1984 – 2009)

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  • Pyemo Afego

    (LQ 54 Malamre Quarters Jimeta Yola Adamawa State – Nigeria.)

Abstract

This paper examines the weak-form efficient markets hypothesis for the Nigerian stock market by testing for random walks in the monthly index returns over the period 1984-2009. The results of the non-parametric runs test show that index returns on the Nigerian Stock Exchange (NSE) display a predictable component, thus suggesting that traders can earn superior returns by employing trading rules. The statistically significant deviations from randomness are also suggestive of suboptimal allocation of investment capital within the economy. The findings, in general, contradict the weak-form of the efficient markets hypothesis. Finally, a range of policy strategies for improving the allocative capacity and quality of the information environment of the NSE are discussed.

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Bibliographic Info

Article provided by Econjournals in its journal International Journal of Economics and Financial Issues.

Volume (Year): 2 (2012)
Issue (Month): 3 ()
Pages: 340-347

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Handle: RePEc:eco:journ1:2012-03-11

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Related research

Keywords: Random walk hypothesis; Market efficiency; Runs test; Stock returns; Nigeria;

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References

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  1. Shinichi Hirota & Shyam NMI Sunder, 2002. "Stock Market as a 'Beauty Contest': Investor Beliefs and Price Bubbles sans Dividend Anchors," Yale School of Management Working Papers, Yale School of Management ysm271, Yale School of Management.
  2. Alagidede, Paul, 2011. "Return behaviour in Africa's emerging equity markets," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 51(2), pages 133-140, May.
  3. M. Magnusson & B. Wydick, 2002. "How Efficient are Africa's Emerging Stock Markets?," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(4), pages 141-156.
  4. Keith Jefferis & Graham Smith, 2005. "The Changing Efficiency Of African Stock Markets," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 73(1), pages 54-67, 03.
  5. Fifield, S G M & Power, D M & Sinclair, C D, 2002. "Macroeconomic Factors and Share Returns: An Analysis Using Emerging Market Data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 7(1), pages 51-62, January.
  6. R. Olowe, 1999. "Weak Form Efficiency of the Nigerian Stock Market: Further Evidence," African Development Review, African Development Bank, African Development Bank, vol. 11(1), pages 54-68.
  7. Lagoarde-Segot, Thomas & Lucey, Brian M., 2008. "Efficiency in emerging markets--Evidence from the MENA region," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 18(1), pages 94-105, February.
  8. Ojah, Kalu & Karemera, David, 1999. "Random Walks and Market Efficiency Tests of Latin American Emerging Equity Markets: A Revisit," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 34(2), pages 57-72, May.
  9. Jensen, Michael C., 1978. "Some anomalous evidence regarding market efficiency," Journal of Financial Economics, Elsevier, Elsevier, vol. 6(2-3), pages 95-101.
  10. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
  11. repec:cup:cbooks:9780521694681 is not listed on IDEAS
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Cited by:
  1. Kamal, Mona, 2014. "Studying the Validity of the Efficient Market Hypothesis (EMH) in the Egyptian Exchange (EGX) after the 25th of January Revolution," MPRA Paper 54708, University Library of Munich, Germany.

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