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HOW EFFICIENT IS THE NIGERIAN STOCK MARKET? FURTHER EVIDENCE

Olatundun J. Adelegan
African Review of Money Finance and Banking
rican Review of Money Finance and Banking (2004), pp. 145-165
Stable URL: http://www.jstor.org/stable/23026297
Page Count: 21
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
HOW EFFICIENT IS THE NIGERIAN STOCK MARKET? FURTHER EVIDENCE
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Abstract

The weak-form Efficient Market Hypothesis (EMH) proposes that share prices fully reflect historical prices and earnings information. This implies that returns on shares follow a random walk and are unpredictable. There exists a strong measure of consensus supported by tremendous amount of research evidence among financial economists on the validity of the weak and semistrong form of the EMH with respect to developed capital markets. However, existing evidence on developing countries markets remains scanty. Therefore there is a need for triangulation in research by providing evidence from emerging markets like Nigeria. The study extends evidence on the efficiency of stock markets in emerging markets using daily data from the Nigerian Stock Exchange (NSE). The data used in the study were obtained mostly from the daily official price list of 50 companies quoted on the NSE for the study period 1992 to 1993. Serial correlation tests and sign tests were carried out and results based upon correlation coefficients across all lags for each company showed that in the vast majority of cases they were consistent with the independence approach. The results of the runs test indicated that the prices series of the majority of the companies were not random. Results that are inconsistent with the randomness hypothesis were observed mainly in the runs test, but this is not enough to conclude that the market is inefficient.

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