The Relationship Between Stock Market and Market Efficiency: the Nigerian Experience

Abstract

The efficient market hypothesis (EMH) has been subject to debate for decades. The field of behavioural finance was developed in response to the body of anomalous evidence with regard to the EMH. However important the establishment of the EMH by Fama in 1970, the first ideas on a theory of efficient markets can be traced back to the origins of modern economics. Reviewing seminal work underlying the efficient markets theory, and focusing on the development of appropriate methodology to test for weak form market efficiency. The study empirically investigated the effect of stock market on efficient market hypothesis with emphasis on weak form hypothesis for the period of 1986 to 2021. Using descriptive analysis and Ordinary Lease Square regression econometric approach to analyze the relationship between stock market and market efficiency in Nigerian. The outcome from the result found that market capitalization has significant effect on share price while value of transaction had insignificant effect on share price in Nigeria, the study therefore concluded there is existence of weak form of efficient market hypothesis in Nigeria stock market.

Keywords: Stock Market, Market Efficiency, Nigeria

DOI: 10.7176/EJBM/15-4-06

Publication date: February 28^th 2023