Predictable or Random?-A Test of the Weak-Form Efficient Market Hypothesis on the Ghana Stock Exchange (original) (raw)
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Empirical Evaluation of Weak-Form Efficient Market Hypothesis in Ugandan Securities Exchange
Capital Markets: Market Efficiency eJournal, 2018
Efficient stock market plays important role in stimulating economic development through providing channel for mobilising domestic savings and facilitating the allocation of financial resources from dormant to more productive activities. This paper evaluates the Ugandan Securities Exchange (USE) for evidence of weak-form efficient market hypothesis in the context of random walk model, using both linear and non-linear models. Preliminary analysis from the USE daily returns, for the 01 September 2011 to 31 December 2016 period, show negative skewness, leptokurtosis, and non-normal distribution. Estimates from the linear models show evidence of weak-form efficiency. Conversely, estimates from non-linear models show evidence against weak-form efficiency of the USE. The study concludes that USE returns may only be predicted using non-linear models and fundamental analysis. In order words, linear models and technical analysis may be clueless for predicting future returns.
Testing the Weak Form of Efficient Market Hypothesis in Nigerian Capital Market
Accounting and Finance Research, 2012
This study aims at testing the weak form of efficient market hypothesis in the Nigerian capital market. The scope of the study consist of all securities traded on the floor of the Nigerian Stock Exchange and the month end value of the All Share Index from 2001-2010 constitute the data analyzed. The serial correlation technique of data analysis was used to test for independence of successive price movement and the distributive pattern while runs test was used to test for randomness of share price movement. The result of the serial correlation shows that the correlation coefficients did not violate the two-standard error test. Furthermore, the Box-Ljung statistic shows that none of the serial correlation coefficients was significant and the Box pierce Q statistics shows that the overall significance of the serial correlation test was poor while the result of the distribution pattern shows that stock price movements are approximately normal. on the basis of this findings ,we conclude that successive price changes of stocks traded on the floor of the Nigerian Capital Market are independent and random therefore, the Nigerian Capital Market is efficient in the weak-form.
Efficient Market Hypothesis and Nigerian Stock Market
The paper examined the weak-form efficient market hypothesis in the Nigerian stock market, using a sample data spanning the period 1986 and 2010. The study adopted a serial auto-correlation and regression method of analysis. The variables used in the study were tested for stationarity using the Augmented Dickey Fuller and Philip Perron test. The result showed that the variables are stationary at first differencing. The result of the serial auto-correlation and regression analysis both revealed that the Nigeria stock market is informational inefficient, that is stock price does not exhibit random walk. The study recommended that to enhance informational efficiency of the Nigerian stock exchange especially in this era where the lost of the global financial crisis have dominated the minds of investors, there is the need to ensure strong and adequate supervision by the regulatory authorities and also the need for a greater development of the Nigeria stock market through appropriate policies which would enhance the informational efficiency of the market. Following the pioneering work by Fama (1965) on the US stock market, a number of studies have attempted to test the efficiency market hypothesis in different stock markets of the world. Vitali and Mollah (2010) examined the weak-form of market efficiency in Africa by testing the Random Walk Hypothesis (RWH) through multi-approach specifically unit root, auto-correlation, runs and variance ratio tests on the daily price indices of Egypt, Kenya, Mauritius, Morocco, Nigeria, South Africa and Tunisia over the period 1999-2009. The empirical results reject the RWH for all stock markets indices over the whole sample
African Finance Journal, 2009
According to the weak-form of the Efficient Market Hypothesis (EMH), investors should not be able to outperform the market consistently by looking at charts of past share prices or by devising trading rules based on historic share returns. This paper investigates the extent to which the equity prices of firms listed on the Nigerian Stock Exchange (NSE) are consistent with this hypothesis. In particular, the paper investigates the weak-form efficiency of the NSE using weekly returns for the 69 most actively traded shares over the period 1995-2005. The paper tests the weak-form of the EMH using a battery of tests including tests of autocorrelations and technical trading strategies. Overall, the analysis indicates that the Nigerian market may be weak-form efficient for ordinary investors who operate in a costly trading environment.
The Efficacy of the Random Walk Hypothesis in the Nigerian Stock Exchange Market
European Journal of Business and Management, 2015
The Efficient Market Hypothesis (EMH) has been a subject of considerable debates in developed economies; for some time now. The debate has been carried into the emerging market. This study contributes to existing evidence on the efficiency of emerging stock markets using data from the Nigerian Stock Exchange (NSE). Quantitative research method was adopted by conducting Normality test, Runs test and modified version of Augmented Dickey-Fuller unit root tests to examine whether stock price changes in the Nigerian stock exchange market were random. Findings from the study reveal that changes in stock price were random. Overall result from the empirical analysis suggests that the Nigerian stock exchange is efficient in the weak form. Keywords: Efficient Market Hypothesis (EMH), Random Walk Theory, Normality and Runs Tests, Nigerian Stock Exchange (NSE), Weak form Efficient.
Predicting the Stock Market Efficiency in Weak Form: A Study on Dhaka Stock Exchange
International Journal of Economics and Financial Issues, 2018
This study aims to examine the weak form efficiency of Dhaka Stock Exchange (DSE) using random walk model of EMH based on daily return series. The study applies both non-parametric [Kolmogorov-Smirnov test with Lilliefors coefficient, run test] and parametric test [autocorrelation test, unit root test and variance ratio test] on DSE general index, DSE broad index and DSE30 index ranging from June 1, 2004, to March 18, 2018. The results of the tests reject the null hypothesis of randomness. On the other hand, the result of the run test shows that share prices of DSE30 index follow the random walk. The return series of DSE broad index show some signs in favour of randomness by autocorrelation test while the returns of DSE general index support the efficiency concerning variance ratio test under both homoscedastic and heteroskedastic assumptions. The overall results of the study show inefficiency of DSE in the weak form which means the investor has a chance to make an abnormal profit p...
Weak Form Efficiency of the Nigerian Stock Market: An Empirical Analysis (1984 – 2009)
2012
This paper examines the weak-form efficient markets hypothesis for the Nigerian stock market by testing for random walks in the monthly index returns over the period 1984-2009. The results of the non-parametric runs test show that index returns on the Nigerian Stock Exchange (NSE) display a predictable component, thus suggesting that traders can earn superior returns by employing trading rules. The statistically significant deviations from randomness are also suggestive of suboptimal allocation of investment capital within the economy. The findings, in general, contradict the weak-form of the efficient markets hypothesis. Finally, a range of policy strategies for improving the allocative capacity and quality of the information environment of the NSE are discussed.
An Empirical Test for Semi-strong form Efficient Market Hypothesis of the Nigeria Stock Market
2021
A capital market is said to be efficient if new information are quickly reflected in stock prices. This study empirically examines how the prices of stocks listed on the Nigerian Stock Exchange quickly respond to monetary policy announcement. The daily All Shares Index and 41 monetary policy announcement from 2014-2020 were used as proxy for stock prices and new information respectively. The Researcher adopted the event study methodology and a 21 day event window was constructed. That is 10 days before monetary policy announcement (-10) and 10 days after the announcement (+10) in addition to the event day. The average abnormal returns (AAR) and the cumulative average abnormal returns (CAARs) were computed and analyzed using the t-statistic to ascertain whether it is possible to earn abnormal return due to monetary policy announcement. The findings revealed that it was not possible to earn abnormal return due to monetary policy announcement. The implication of this result is that stock prices quickly adjust to new information (monetary policy rate announcement) therefore making it difficult for market participants to outperform the market.Thus, the Researcher concluded that the Nigeria stock market is semi-strong form efficient.
International Journal of Management, 2013
The random walk theory asserts that stock price movements are unpredictable and follow a random erratic behavior. Similarly, the weak-form efficiency of the efficient market hypothesis states that everything is random; and past historical data on stock prices are of no use in predicting future prices. Thus, the aim of this study is to examine the random walk theory and testing the weak-form efficiency of Istanbul Stock Exchange. The study uses daily observations of XU 030 Index from January 1997 until December 2011, and employs unit root tests, runs tests and variance ratio test to investigate the random behavior of Istanbul Stock Market. The tests empirical findings reject the null hypothesis suggesting that Istanbul Stock Exchange does not follow a random walk behavior and, therefore, it is informationally inefficient at the weak-form level. These results suggest that investors will realize abnormal returns by using historical sequences of stock prices, data related to trading volumes and other market-generated information.