SHARE PRICE BEHAVIOURS IN NIGERIAN STOCK MARKET: AN EMPIRICAL TEST OF THE RANDOM WALK HYPOTHESIS
SHARE PRICE BEHAVIOURS IN NIGERIAN STOCK MARKET: AN EMPIRICAL TEST OF THE RANDOM WALK HYPOTHESIS
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Date
1994-08
Authors
ORINYA, JOHN OGBU
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Abstract
Several theories, representing professional schools
of thought, have been developed to explain the stochastic
processes underlying security price behaviours in Stock
Markets. These schools differ in approach and are not agreed
in their conclusions. Although no one of them has been
accepted as conclusive, the random walk model represents
profound Interest and impact among financial analysts. The
model maintains that highly competitive and organized
markets create prices which accurately reflect all current
information. In effect, price changes will assimilate new
Information and thus approximate a random walk.
If this theory is valid, past prices provide no
information useful in estimating future prices. The next price
change is independent of all past moves. Acceptance of this
model has been based on empirical evidence provided by studies
of the industrialized markets, particularly those of the
United States. Studies of non-U.s. markets present evidence
that do not altogether refute or support the theory. The
present study focused on share price behaviours in the
Nigerian stock market.
The purpose of the study is to test the simple random
walk hypothesis that successive price changes are independent
and to view the results of its application to the behaviours
of ordinary share prices in the Nigerian Stock Market. The
results obtained show that though these prices move
according to some discernible patterns, there is small
dependence in successive changes within the period covered
by the study. It is concluded therefore, that the random
walk model is probably a valid description of stock price
behaviours in the Nigerian Stock Market.
Description
A RESEARCH PROJECT SUBMITTED TO THE
POST GRADUATE SCHOOL, AHMADU BELLO
UNIVERSITY, ZARIA IN PARTIAL
FULFILMENT OF THE REQUIREMENTS
FOR THE AWARD OF THE DEGREE OF
MASTERS IN BUSINESS ADMINISTRATION
AUGUST, 1994
Keywords
SHARE PRICE BEHAVIOURS,, NIGERIAN,, STOCK MARKET,, EMPIRICAL TEST,, RANDOM WALK HYPOTHESIS.