Emenike, Kalu O. (2008): Efficiency across Time: Evidence from the Nigerian Stock Exchange. Published in: International Journal of Management Sciences , Vol. 1, No. 2 (February 2010)
Download (266kB) | Preview
This paper examines the Weak-Form Efficient Market Hypothesis across time for the Nigerian Stock Exchange (NSE) by hypothesizing Normal Distribution and Random walk in periodic return series. Monthly all share indices of the NSE are examined for three periods including January 1985 to December 1992, January 1993 to December 1999, and January 2000 to December 2007. Our Normality tests are conducted using Skewness, Kurtosis, Kolmogorov-Smirnov, and Q-Q Normal Chart; whereas Random walk is tested using the non-parametric Runs test. Results of the Normality tests show that returns from NSE do not follow normal distribution in all the periods. Runs test results reject the randomness of the return series of the NSE in the periods studied. Overall results from the tests suggest that the NSE is not Weak-Form efficient across the time periods of this study. The results however, show that improvements in NSE trading system have positive effect on efficiency. Relaxing institutional restrictions on trading securities in the market and strengthening the regulatory capacities of NSE and Nigerian Securities and Exchange Commission (NSEC) to enforce market discipline were recommended.
|Item Type:||MPRA Paper|
|Original Title:||Efficiency across Time: Evidence from the Nigerian Stock Exchange|
|English Title:||Efficiency across Time: Evidence from the Nigerian Stock Exchange|
|Keywords:||Weak-Form Efficiency, Random Walk, Normal Distribution, Nigerian Stock Exchange, Trading System|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies|
|Depositing User:||Emenike Kalu O.|
|Date Deposited:||30. May 2010 06:50|
|Last Modified:||12. Feb 2013 22:02|
Akpan, O.E. (1995), n” Thin and Thick capital Markets”, Nigerian Journal of Social and Economic Research, 1 (37), 2-4.
Amihud, Y.; Mendelson, H. and Lauterbach, B. (1997),” Market Microstructure and Securities Values: Evidence From Tel Aviv Stock Exchange,” Journal of Financial Economics, 45, 356-390.
Anyanwu, D.C. (1998), “Stock Market Development and Nigeria’s Economic Growth”, Nigerian Journal of Economics and Social Studies, 1 (2) 4-7.
Apampa, S. (228), “How Efficient is the Nigerian Capital Market?, Business Day, Feb. 6 (303), 22.
Appiah-Kusi, J. and Menya, K. (2003), Return Predictability in African Stock Markets”, Review of Financial Economics, 12, 247-270.
Ayadi, O. (1984), “ Random Walk Hypotheis and the Behaviour of Stock Price in Nigeria”, The Nigeria Journal of Economics and Social Studies, 26 (1), 57-71.
Barnes, P. (1986), “Thin Trading and Stock Market Efficiency: The case of the Kuala Lumpur Stock Exchange”, Journal of Business, Finance and Accounting, 13 (4) 609-617.
Bodie, Z.; Kane, A. and Marcus, A.J. (2001), Investments (4th Ed.), Singapore: McGraw Hill Inc.
Campbell, A. Y.; Lo, A. W., and Mackinlay A. C. (1997) The Econometrics of Financial Markets, Princeton NJ: Princeton University Press.
Chuks, O. (2007), “Recapitalisation Fever Hits Capital Market”, http://www.stockmarketnigeria.com/2007/04/26/recapitalisation-fever-hits-capital-market.
Claessens, S.; Dasgupta, S. and Glen, J. (1995),” Returns Behaviour in Emerging Stock Market”, World Bank Economic Review, 9,131-152.
Dickinson, J.P. and Muragu, K. (1994), “Market Efficiency in Developing Countries: A Case Study of the Nairobi Stock Exchange”, Journal of Business Finance and Accounting, 21 (1), 133- 150.
Fama, E. (1965), “The Behaviour of Stock Market Prices”, Journal of Business, 38, 34-105.
Fama, E. (1970), “Efficient Capital Market: A Review of Theory and Empirical Tests”, Journal of Finance, 25, 3852, 417.
Fama, E. F. (1991), “Efficient capital markets: II”, Journal of Finance, 46(5), 1575-1615.
Fama, E. and Blume, M. (1966), “Filters Rules and stock Market Trading Profits”, Journal of Business, 39, (January)
Fama, E. F. and French, K. R. (1988), “Permanent and temporary components of stock prices”, Journal of Political Economy, 96, 246-273
Gujarati, D.N. (2003), Basic Econometrics (4th Ed), Delhi: McGraw Hill Inc.
Jefferis, K. and Smith, G (2005), “The Changing Efficiency of African Stock Markets”, South African Journal of Economics, 73, (1), 54-67.
Kendal. M. (1953), “The Analysis of Economic Time Series, part 1: prices” Journal of the Royal Statistical Society, Series A, 96, 11-25.
Mlambo, C.; Biekpe, N. and Smit E.M. (2003), “Testing the Random Walk Hypothesis on Thinly Traded Markets: The Case of four African Stock Markets”, The African Journal of Finance, 5 (1), 16-35.
Ngugi, R.W., Murinde, V. and Green, C.J. (2003),”How have the Emerging Stock Exchanges in Africa Responded to Market Reforms”, Journal of African Business, 4, (2), 89-127.
Nigerian Stock Exchange (2007) Monthly Stock Market Review, 5, (7), January.
Nigerian Stock Exchange (2007) Monthly Stock Market Review, 6, (1), July.
Nnanna, O.J.; Englama, A. and Odoko, F.O. (2004), Financial Markets in Nigeria (ed), Abuja: Central Bank of Nigeria.
Ntim, C.G. Opong, K.K. and Dunbolt, J. (2007), “An Empirical Re-Examination of the Weak Form Efficient Market Hypothesis of the Ghana Stock Market Using Variance Ratio Tests”, African Finance Journal, 9 (2).
Nworah, U. (2007), “Nigeria Stock Exchange Launch New Share Index”, http://nigerianbrands.blogspot.com/2007/09/nigerian-stock-exchange-launch-new.html
Okafor, F. O. (1983), Investment Decisions: Evaluation of Projects and Securities, Cassell: London.
Olowe, R.A. (1999), “Weak Form Efficiency of the Nigerian Stock Exchange Market: Further Evidence”, African Development Review, 11, (1) 54-68.
Rahman, S. and Hossain M.F. (2006), “Weak Form Efficiency: Testimony of Dhaka Stock Exchange”, Journal of Business Research, 8, 1-12.
Samuels, J.M. and Yacout, M. (1981),”Stock Exchange in Developing Countries”, Savings and Development, 5, (4), 309-328.
Simons, D. and Laryea, S.A. (2004), “Testing the Efficiency of selected African Stock Markets”, A Working Paper. http://paper.ssrn.com/so13/paper.cfm?abstract_id=874808.
Spiegel, M.R. and Stephens, L.J. (1999), Schaum’s Outline of Theory and Problems of Statistics (3rd Ed.), USA: McGraw Hill Inc.
Spiegel, M.R. and Stephens, L.J. (2008), Schaum’s Outline of Theory and Problems of Statistics (4rd Ed.), USA: McGraw Hill Inc.
Suzuki, K. and Yasuda, Y. (2006), “Market Microstructure and Stock Prices: Firms and their Selection of Trading Mechanism in the JASDAQ Market”, Tokyo university of Science Discussion Paper, Series, Ms-05-02.