Weak Form Efficiency of the Nigerian Stock Market: Further Evidence

Olowe, Rufus Ayodeji

doi:10.1111/1467-8268.00003

Cited by 63 publications

(46 citation statements)

References 15 publications

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“…This study shows the evidences in favor of RWH in G-7 country stock markets. The study conducted by Olowe (1999) in the context of Nigerian stock market also supports the proposition of RWH. Dahel and Laabas (1999) carried out a test of RWH on the capital markets of Bahrain, Kuwait, Oman and Saudi Arabia.…”

Section: Related Past Studiessupporting

confidence: 63%

Daily Stock Price Behavior of Commercial Banks in Nepal

Baral

Shrestha

2007

Journal of Nepalese Business Studies

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Using the data set on daily stock prices during the fiscal year 2005/06 (July 16, 2005 through July 16, 2006 Key words: securities market, stock price behavior theories THE SECURITIES MARKET PLAYS an important role in mobilizing savings and channeling them into productive investment for the development of commerce and industry in the country. It assists the capital formation and economic growth in the country. But, the Nepalese securities market still is in growing stage. Its further development is crucial. There are two approaches of predicting stock price behavior: the technical analysis and fundamental analysis. Briefly, technical analysis explains and forecasts changes in security prices by studying the market data. The technical analysts believe that the forces of supply and demand are reflected in the patterns of price and volume of trading while fundamental analysts do that economic environment and earning power are reflected in the pattern of market prices (Fischer and Jordan 2000). Technicians predict the stock price behaviour by analysing the pattern of price and volume of trading. But the fundamentalists predict the stock price behavior by analyzing earning power and the economic environment in the risk-return framework. The fundamentalists believe that at any point in time every share has an intrinsic value which should be in principle be equal to the present value of the future stream of income from that share discounted at an appropriate risk related rate of interest (Bhalla 1999). Thus, the actual price of the security is considered a function of a set of anticipated capitalization rate.In Nepal, the major constituent of the securities market is the shares of commercial banks and behavior of price of commercial banks influences the Nepal Stock Exchange (NEPSE) index. This study examines the stock price behavior of listed commercial banks by using the daily price movements of 7 commercial banks sampled randomly in the fiscal year 2005/06. Theoretical Framework: Random Walk Hypothesis (RWH)We discussed that there are two approaches to predict the stock price behaviour. Randon walk hypothesis is the third approach to predict the stock price behavior and this is a weak form of the efficient-market hypothesis. This thoery raises the question on the belief of technicians. It, contradictory to the contention of technicians, pleads that pattern of stock price and volume of trading does not aid to predict the stock price behavior.In more generalized term, random walk hyptohesis states that previous price changes or changes in return are useless in predicting future price or return changes. In other words,

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Section: Related Past Studiessupporting

confidence: 63%

Daily Stock Price Behavior of Commercial Banks in Nepal

Baral

Shrestha

2007

Journal of Nepalese Business Studies

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“…Two pieces of research that focus specifically on African markets are Dickinson and Muragu [1994] and Olowe [1999]. Dickinson and Muragu create a database of weekly prices over ten years of the 30 most actively traded equities on the Nairobi Stock Exchange.…”

Section: The Efficient Markets Hypothesis and Previous Testing Ofmentioning

confidence: 99%

“…They fail to find evidence inconsistent with weak-form efficiency in the stock exchange by means of both runs tests and Q-test statistics, but suggest that a number of studies must be carried out on any market using a variety of methodologies to draw firm conclusions about weak-form efficiency. Olowe [1999] carries out tests using monthly data on 59 randomly selected securities from 1981-92 on the Nigerian Stock Exchange. He finds the Nigerian market to conform to weak-form efficiency in joint Q-tests of partial autocorrelation coefficients for ten lags in the return data, though he argues that poor informational flows and inefficient communications systems cast doubts on the ability of the market to pass higher hurdles of efficiency.…”

Section: The Efficient Markets Hypothesis and Previous Testing Ofmentioning

confidence: 99%

How Efficient are Africa's Emerging Stock Markets?

Magnússon¹,

Wydick²

2002

Journal of Development Studies

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The development of financial institutions has been viewed in recent years as critical to the economic development process. This research uses recent data from the eight largest African stock markets to test whether these markets meet the criterion of weak-form stock market efficiency with returns characterised by a random walk. Results are then compared with similar tests on emerging stock markets in South-east Asia and Latin America. Conclusions from the research indicate that test results for weak-form efficiency in the emerging African stock markets compare favourably with those performed on other emerging stock markets.development of financial institutions, African stock markets, weak-form efficiency, emerging stock markets,

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“…The results show that the share price movements on the NSE follow a random walk. Olowe (1999), carries out tests of weak form efficiency in Nigeria using monthly data on 59 randomly selected securities from 1981-1992. He finds the Nigerian market to conform to weak-form efficiency in joint Q-tests of partial autocorrelation coefficients for ten lags in the return data, though he argues that poor informational flows and inefficient communications systems cast doubts on the ability of the market to pass higher hurdles of efficiency.…”

Section: Empirical Reviewmentioning

confidence: 99%