Weak Form Efficiency of the Nigerian Stock Market: An Empirical Analysis (1984 – 2009)

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.