Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations

Ejem Chukwu Agwu; Ogbonna Udochukwu Godfrey; Okpara Godwin Chigozie

doi:doi:10.11648/j.ijafrm.20200503.12

| Peer-Reviewed

Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey, Okpara Godwin Chigozie

Published in International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 3)

Received: 25 May 2020 Accepted: 8 June 2020 Published: 28 June 2020

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

The endless arguments on which Efficient Market Hypotheses form Nigeria Stock exchange (NSE) belongs incited this study; Efficient Market Hypotheses controversy and Nigerian Stock Exchange Relations. In order to achieve the aim of this study, the All Share Index (ASI) with daily data from January 02, 2014 to May 20, 2019 (1333 observations) and annual data from 1985 to 2018 (34 observations) collected from the Nigeria Stock Market fact books. The study employed three analytical methods namely the unit root test, GARCH Model and the Autocorrelation cum patial autocorrelation method for the assessment of weak form hypothesis on the daily and annual all share index in the Nigerian Stock market. The results of these evaluations indicated a significant relationship between the price series and their lagged values implying that stock price series do not follow a random walk process in Nigerian stock market. Thus, affirming that the Nigeria Stock Exchange is not efficient in weak form. In the light of this, the researchers recommend that the supervisory and regulatory authorities should strengthen the Nigerian Stock Market through palliating its regulations pertaining to transparency of information management rules such as market barriers and stringent listing requirement, publication of accounts, notices of annual general meeting and the like.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 3)
DOI	10.11648/j.ijafrm.20200503.12
Page(s)	131-140
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Random Walk, Capital Market Efficiency, Unit Root Test, GARCH Model, Autocorrelation

References

[1]	Adebanjo, J. F., Awonusi, F. & Eseyin, O. (2018). The weak form market efficiency and the Nigerian stock exchange. Afro Asian Journal of Social Science, 9 (4). 1-17.
[2]	Adelegan. O. J. (2009), Price reactions to dividend announcements on the Nigerian stock market. AERC Research Paper 188. Nairobi.
[3]	Afego, P. (2011). Stock price response to earnings announcements: evidence from Nigeria. Available at SSRN: http://ssrn.com/abstract=1768762. Retrieved 10/4/2020.
[4]	Afego, P. (2012). Weak form efficiency of the nigerian stock market: An empirical analysis.. International Journal of Economics and Financial Issues. 2 (3), 340-347.
[5]	Agwuegbo, S. O. N., Adewole, A. P. & Maduegbuna, A. N. (2010). A random walk model for stock market prices. Journal of Mathematics and Statistics. 6 (3), 342-346.
[6]	Ajao, G & Osayuwu, R. (2012). Testing the weak form of efficient market hypothesis in Nigerian capital market. Accounting and Finance Research, 1 (1).
[7]	Ayadi, S. & Bouri, A. (2009). Intervening parties’ behaviours and its impact on the financial market functioning. International Research Journal of Finance and Economics. 31, 101–115.
[8]	Bachellier, L. (1900). Theorie de la Paris: Gauthier - Villars. Reprinted in English (Bones trans.) in Cootner PH edited 1964". The random character of stock market prices, MITpress.
[9]	Bashir, T., David, P. & Suzanne, F. (2009). An empirical investigation of the weak-form of the efficient market hypothesis for the Nigerian stock exchange. African Finance Journal. 11 (2), 1-27.
[10]	Bhalla, V. K. (2011). Investment management: Security analysis and portfolio management. New Delhi: S. Chad and Company Ltd.
[11]	Bodie, Z., Kane, A., Marcus, A. J. & Mohanty, P. (2013). Investment (8^th editon). New Delhi: McGraw Hill Education.
[12]	Brealey, R. A. & Myers, S. C. (2003). Principles of corporate finance. New Delhi: McGraw Hill.
[13]	Broyles, J. (2003). Financial management and real options. England: John Wiley & Son Ltd.
[14]	Chien-Chong, L., Jung-De, L, & Chi-Chuan, L. (2010). Stock prices and the efficient market hypothesis: Evidence from a panel stationary test with structural breaks. Japan and the World Economy, (22) 1, 49-58.
[15]	Cooray, V & Wickramasighe, G. (2007). The efficiency of emerging stock markets: Empirical evidence from the South Asian region. Journal of Developing Areas. 41 (1), 171-183.
[16]	Cuthbertson, K. & Nitzsche, K. (2005). Investments: Spot and derivatives market. New York: JohnWilley and Sons Ltd.
[17]	Dickinson, J. P. & 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.
[18]	Dimson, E. & Mussavian, M. (1998). A brief of history of market efficiency. European Financial Management, 4 (1), 91-193.
[19]	Downey, L. & Scott, G. (2020). Efficient Market hypothesis. www.investopia.org. Retrieved on 09/04/2020.
[20]	Edmans, A.(2009). Blockholder trading, market efficiency and managerial myopia. The Journal of Finance, 64 (6), 2481 – 2513.
[21]	Efobi. U. R. (2010). The efficient market hypothesis: Realities from the Nigerian stock market. Global Journal of Finance and Management, 2 (2), 321-331.
[22]	Emenike, K. O. (2008). Empirical test for weak form efficient market hypothesis of the Nigerian stock exchange. Social Science Research Network (SSRN). Working Paper Series.
[23]	Ezirim, B. C. (2005). Finance dynamics: Principles, techniques and approaches. Portharcourt: Markowitz Centre for Research and Development.
[24]	Fama, E. (1965). The behaviour of stock market prices. Journal of Business, 38, January edition, 34-49.
[25]	Fama, E. F. (1976). Reply to efficient capital markets: Comments. Journal of Finance, 31 (1), 143-145
[26]	Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. Journal of Finance, 25 (1), 83-417.
[27]	Fisher, D. E. & Jordan, R. J. (2005). Security analysis and portfolio management. Delhi: Pearson Education.
[28]	Gagan. D. S & Mahendru. M. (2009). Efficiency hypothesis of the stock markets: A case of Indian securities. International Journal of Business and Management. Available at SSRN: http://ssrn.com/abstract=1827522. Retrieved 01/3/2020.
[29]	Gao, P. (2008). Keynesian beauty contest, accounting disclosure and market efficiency. Journal of Accounting Research, 46 (4), 785-807.
[30]	George, E. O. & Oseni, J. E. (2012). The influence of information asymmetry on equity pricing: A theoretical perspective. American Journal of Scientific Research, 65, 42-50.
[31]	Gimba, V. K. (2012). Testing the weak form efficiency market hypothesis: Evidence from Nigeria stock market. CBN Journal of Applied Statistics, 3 (1), 117-136.
[32]	Goudarzi, H. (2013). Volatility mean reversion and stock market efficiency. Asian Economic and Financial Review, 3 (13), 1681-1692.
[33]	Heman, S. C. (2001). Security management and the validity of portfolio market theories, An MBA. Project submitted to the Department of Business Administration, University of Benin, Nigeria.
[34]	Ibenta, S. N. (2005). Investment analysis and financial management strategy. Enugu: Institute of Development Studies.
[35]	Jones, S. L. & Netter, J. M. (2008). Efficient capital markets. The concise encyclopedia of economics. Library of economics and liberty. Http://www.econlib.org/library/Enc/EfficientCapitalMarkets.html. Retrieved 20/2/2020.
[36]	Keith. J & Graham. S (2005). The changing efficiency of African stock markets. South African Journal of Economics 73, 1.
[37]	Kendall, M. G. (1953). The analysis of economic time series, Prices. Journal of the Royal Statistical Society, 96, 11–25.
[38]	Liu, C. and He, J. (1991). A variance - ratio test of random walks in foreign exchange rates. Journal of finance, 46 (2), 773-785.
[39]	Malkiel (1973). A Random walk down wall street: The Time-Tested strategy for successful investing. New York: W. W Norton and Co.
[40]	Manasseh, O. C, Asogwa, F. O & Agu, D. O (2012). The causality effect of stock market development, financial sector reforms and economic growth in Nigeria; The Applicationof Vector Autoregressive (VAR) and Vector Error Correction Model (VECM). A Paper presented at the Global Development Finance Conference. Crystal Towers, Century City, Cape Town, South Africa.
[41]	Nasir, M. A., Khan, K. & Rossi M. (2016). The calendar anomalies on performance and volatility of stock market: The effects of Ramadan on Karachi Stock exchange. https://www.researchgate.net/publication/322984494. Accessed, Apr 13 2020.
[42]	Ogbulu, O. M. (2016). Weak-form market efficiency, estimation interval and the Nigerian Stock Exchange: Empirical evidence. International Journal of Economic and Business, 5 (1), 84-116.
[43]	Ogundina, J. A & Omah, I. (2013). Test of capital market efficiency theory in the Nigerian capital market. Research Journal of Finance and Accounting. 4 (1).
[44]	Okpara, G. C. (2010a). Stock market prices and the random walk hypothesis: Further evidence from Nigeria. Journal of Economics and International Finance, 2 (3), 49-57.
[45]	Okpara, G. C. (2010b). Analysis of weak form efficiency on the Nigerian stock Market: Further evidence from GARCH model. The International Journal of Applied Economics and Finance, 4 (2), 62-66.
[46]	Okpara, G. C. (2012). Fundamentals of corporate financial management. Uyo: Donil Prints Ltd.
[47]	Okpare, G. C. (2011). Random walk. Semi-strong hypothesis and market behavior: A test of weak and semi-strong form efficiency in the Nigerian stock market. USA: LAP LAMBERT Publishing.
[48]	Olowe, A. R. (1999). Weak form efficiency of the Nigeria stock market: Further evidence. African Development Review. 11, 54.
[49]	Oludoyi, S. B. (1998). Capital market efficiency and the effects of earning announcements on share prices in Nigeria. PhD. Thesis, University of Ibadan, unpublished.
[50]	Osaze, B. E. (2000). Nigerian Capital Market in the African and Global Financial System, Benin City: Bofic Consulting Group Limited.
[51]	Osinubi, T. S. (2000). Does stock market promote economic growth in Nigeria? http://sta.uwi.edu/conferences/financeconference. Rtrieved 3/2/2020.
[52]	Otaniyi, O. & Makina, D. (2010). Price behaviour of new share listings in Nigeria. International Business & Economics Research Journal. 9, 4.
[53]	Peterson, K (1905) The problem of Random Walk. Nature; 72: 294-34.
[54]	Rayleagh L (1905). A Random walks. Nature, 73: 174.
[55]	Reily, F. K. (1989). Investment analysis and portfolio management, Hinsdale, Illinois: Dryden Press.
[56]	Ross, S. A., Westerfield, R. W., Jaffe, J. & Jordan, B. D. (2009). Modern financial management (8^th edition). New Delhi: McGraw Hill.
[57]	Rossi, M. (2016). The capital asset pricing model: A critical literature review. Global Business and Economics Review, 18 (5), 604-617.
[58]	Rossi, M. & Guardi, A. (2018). Efficient market hypothesis and stock market anomalities: Empirical evidence in four European countries. The Journal of Applied Business Research, 34 (1), 183-192.
[59]	Sabur, M & Vitali, F. (2011). Stock market efficiency in Africa, Evidence from random walk hypothesis. www. Googlescholar.com. Retrieved 4/3/2020.
[60]	Samuels, J. M & R. Wilkes (1981). Management of Company Finance, Lagos: Thomas Nelson.
[61]	Segal, T. (2019). Market timing. www.investopia.org. Retrieved 0n 09/04/2020.
[62]	Sergeant, T. J. & Wallace, N. (1975). Rational expectations, the optimal monetary instrument, and the optimal money supply rule. Journal of Political Economy, 83, 241-54.
[63]	Sharpe, W. F., Alexander, G. J. & Bailey, J. V. (1999). Investments. (6th Edition). Upper Saddle River: Prentice-Hall, Inc.
[64]	Udoka, C. O. (2012). Weak-form market efficiency: Dynamic effects of information on the Nigerian stock market. Interdisciplinary journal of contemporary research in business, 4, 7.
[65]	Wong K. & Kwong K, (1984). The behaviour of Hong Kong stock prices. Applied Economics. 16, 905–917.

Cite This Article

Plain Text BibTeX RIS

APA Style

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey, Okpara Godwin Chigozie. (2020). Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations. International Journal of Accounting, Finance and Risk Management, 5(3), 131-140. https://doi.org/10.11648/j.ijafrm.20200503.12

Copy | Download

ACS Style

Ejem Chukwu Agwu; Ogbonna Udochukwu Godfrey; Okpara Godwin Chigozie. Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations. Int. J. Account. Finance Risk Manag. 2020, 5(3), 131-140. doi: 10.11648/j.ijafrm.20200503.12

Copy | Download

AMA Style

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey, Okpara Godwin Chigozie. Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations. Int J Account Finance Risk Manag. 2020;5(3):131-140. doi: 10.11648/j.ijafrm.20200503.12

Copy | Download

@article{10.11648/j.ijafrm.20200503.12,
  author = {Ejem Chukwu Agwu and Ogbonna Udochukwu Godfrey and Okpara Godwin Chigozie},
  title = {Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {5},
  number = {3},
  pages = {131-140},
  doi = {10.11648/j.ijafrm.20200503.12},
  url = {https://doi.org/10.11648/j.ijafrm.20200503.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20200503.12},
  abstract = {The endless arguments on which Efficient Market Hypotheses form Nigeria Stock exchange (NSE) belongs incited this study; Efficient Market Hypotheses controversy and Nigerian Stock Exchange Relations. In order to achieve the aim of this study, the All Share Index (ASI) with daily data from January 02, 2014 to May 20, 2019 (1333 observations) and annual data from 1985 to 2018 (34 observations) collected from the Nigeria Stock Market fact books. The study employed three analytical methods namely the unit root test, GARCH Model and the Autocorrelation cum patial autocorrelation method for the assessment of weak form hypothesis on the daily and annual all share index in the Nigerian Stock market. The results of these evaluations indicated a significant relationship between the price series and their lagged values implying that stock price series do not follow a random walk process in Nigerian stock market. Thus, affirming that the Nigeria Stock Exchange is not efficient in weak form. In the light of this, the researchers recommend that the supervisory and regulatory authorities should strengthen the Nigerian Stock Market through palliating its regulations pertaining to transparency of information management rules such as market barriers and stringent listing requirement, publication of accounts, notices of annual general meeting and the like.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations
AU  - Ejem Chukwu Agwu
AU  - Ogbonna Udochukwu Godfrey
AU  - Okpara Godwin Chigozie
Y1  - 2020/06/28
PY  - 2020
N1  - https://doi.org/10.11648/j.ijafrm.20200503.12
DO  - 10.11648/j.ijafrm.20200503.12
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 131
EP  - 140
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20200503.12
AB  - The endless arguments on which Efficient Market Hypotheses form Nigeria Stock exchange (NSE) belongs incited this study; Efficient Market Hypotheses controversy and Nigerian Stock Exchange Relations. In order to achieve the aim of this study, the All Share Index (ASI) with daily data from January 02, 2014 to May 20, 2019 (1333 observations) and annual data from 1985 to 2018 (34 observations) collected from the Nigeria Stock Market fact books. The study employed three analytical methods namely the unit root test, GARCH Model and the Autocorrelation cum patial autocorrelation method for the assessment of weak form hypothesis on the daily and annual all share index in the Nigerian Stock market. The results of these evaluations indicated a significant relationship between the price series and their lagged values implying that stock price series do not follow a random walk process in Nigerian stock market. Thus, affirming that the Nigeria Stock Exchange is not efficient in weak form. In the light of this, the researchers recommend that the supervisory and regulatory authorities should strengthen the Nigerian Stock Market through palliating its regulations pertaining to transparency of information management rules such as market barriers and stringent listing requirement, publication of accounts, notices of annual general meeting and the like.
VL  - 5
IS  - 3
ER  -

Copy | Download

Author Information

Ejem Chukwu Agwu

Department of Banking and Finance, Abia State University, Uturu, Nigeria
Ogbonna Udochukwu Godfrey

Department of Management Science, Rhema University, Aba, Nigeria
Okpara Godwin Chigozie

Department of Banking and Finance, Abia State University, Uturu, Nigeria

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey, Okpara Godwin Chigozie. (2020). Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations. International Journal of Accounting, Finance and Risk Management, 5(3), 131-140. https://doi.org/10.11648/j.ijafrm.20200503.12

Copy | Download

ACS Style

Ejem Chukwu Agwu; Ogbonna Udochukwu Godfrey; Okpara Godwin Chigozie. Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations. Int. J. Account. Finance Risk Manag. 2020, 5(3), 131-140. doi: 10.11648/j.ijafrm.20200503.12

Copy | Download

AMA Style

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey, Okpara Godwin Chigozie. Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations. Int J Account Finance Risk Manag. 2020;5(3):131-140. doi: 10.11648/j.ijafrm.20200503.12

Copy | Download

@article{10.11648/j.ijafrm.20200503.12,
  author = {Ejem Chukwu Agwu and Ogbonna Udochukwu Godfrey and Okpara Godwin Chigozie},
  title = {Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {5},
  number = {3},
  pages = {131-140},
  doi = {10.11648/j.ijafrm.20200503.12},
  url = {https://doi.org/10.11648/j.ijafrm.20200503.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20200503.12},
  abstract = {The endless arguments on which Efficient Market Hypotheses form Nigeria Stock exchange (NSE) belongs incited this study; Efficient Market Hypotheses controversy and Nigerian Stock Exchange Relations. In order to achieve the aim of this study, the All Share Index (ASI) with daily data from January 02, 2014 to May 20, 2019 (1333 observations) and annual data from 1985 to 2018 (34 observations) collected from the Nigeria Stock Market fact books. The study employed three analytical methods namely the unit root test, GARCH Model and the Autocorrelation cum patial autocorrelation method for the assessment of weak form hypothesis on the daily and annual all share index in the Nigerian Stock market. The results of these evaluations indicated a significant relationship between the price series and their lagged values implying that stock price series do not follow a random walk process in Nigerian stock market. Thus, affirming that the Nigeria Stock Exchange is not efficient in weak form. In the light of this, the researchers recommend that the supervisory and regulatory authorities should strengthen the Nigerian Stock Market through palliating its regulations pertaining to transparency of information management rules such as market barriers and stringent listing requirement, publication of accounts, notices of annual general meeting and the like.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations
AU  - Ejem Chukwu Agwu
AU  - Ogbonna Udochukwu Godfrey
AU  - Okpara Godwin Chigozie
Y1  - 2020/06/28
PY  - 2020
N1  - https://doi.org/10.11648/j.ijafrm.20200503.12
DO  - 10.11648/j.ijafrm.20200503.12
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 131
EP  - 140
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20200503.12
AB  - The endless arguments on which Efficient Market Hypotheses form Nigeria Stock exchange (NSE) belongs incited this study; Efficient Market Hypotheses controversy and Nigerian Stock Exchange Relations. In order to achieve the aim of this study, the All Share Index (ASI) with daily data from January 02, 2014 to May 20, 2019 (1333 observations) and annual data from 1985 to 2018 (34 observations) collected from the Nigeria Stock Market fact books. The study employed three analytical methods namely the unit root test, GARCH Model and the Autocorrelation cum patial autocorrelation method for the assessment of weak form hypothesis on the daily and annual all share index in the Nigerian Stock market. The results of these evaluations indicated a significant relationship between the price series and their lagged values implying that stock price series do not follow a random walk process in Nigerian stock market. Thus, affirming that the Nigeria Stock Exchange is not efficient in weak form. In the light of this, the researchers recommend that the supervisory and regulatory authorities should strengthen the Nigerian Stock Market through palliating its regulations pertaining to transparency of information management rules such as market barriers and stringent listing requirement, publication of accounts, notices of annual general meeting and the like.
VL  - 5
IS  - 3
ER  -

Copy | Download