An Empirical Analysis of Efficiency of the Nigerian Capital Market

Abstract

This study investigates empirically the efficiency of the Nigerian Stock Market and to test whether professionally managed funds beat the market index or not.  The average monthly returns data of five banks over the period 2007 to  2011 were used.

The “market model” for estimating residuals was used to test the efficiency of the Nigerian Stock Market. The abnormal return of the professionally managed portfolio is found to be insignificantly different from zero. The result indicates that the Nigerian Stock Market is efficient in the strong form. The results from our findings thus recommend fully computerisation of the Nigerian Stock Exchange and Stock broking firms so that effective communication system; and timely, quick and instant access to price-sensitive information to maintain the strong form efficiency of the Nigerian Stock Market.

Keywords: Efficient Market Hypothesis, Abnormal profit, managed funds, stock market crash, public information.