Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis

Ajayi John Ayodele; Ogbulu Onyemachi Maxwell

doi:doi:10.11648/j.jfa.20170504.13

| Peer-Reviewed

Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis

Ajayi John Ayodele, Ogbulu Onyemachi Maxwell

Published in Journal of Finance and Accounting (Volume 5, Issue 4)

Received: 20 October 2016 Accepted: 16 November 2016 Published: 21 June 2017

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

This study investigates the semi- strong efficiency theory in the Nigerian stock market. The study used daily returns from the Nigerian stock market over the period of January 1, 2005, to December 31, 2013, of which about 80 companies that retained their quoting status were used as the sample for the study. A modified transfer function approach was built to show a cause and effect relationship between the output index represented by the All-Share Index of the Nigerian Stock Exchange and the input series represented by the computed index of the selected securities in the Nigerian stock market. Findings from the study showed that the coefficient of the input index is significantly different from zero implying that investors can outperform the market based on published information hence making the market be semi-strong inefficient.

Published in	Journal of Finance and Accounting (Volume 5, Issue 4)
DOI	10.11648/j.jfa.20170504.13
Page(s)	139-146
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Semi-Strong, Stock Market, Input-Output, Transfer Function

References

[1]	Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work, Journal of Finance, PP 383-417.
[2]	Fama, E. F. (1991). Efficient capital markets: II, Journal of Finance, 46 (5, December): PP 1575-617.
[3]	Khoury, J. S. (1983). Investment Management Theory and Application, New York, Macmillan Publishing.
[4]	Olowe, R. A. (1998), Stock splits and the efficiency of the Nigerian stock market. African Review of Money, Finance and Banking, 1 (2): PP 97-125.
[5]	Olowe R. A (2011). Financial Management, Forthright Publishers: Lagos. Copeland, T. E. & Weston, J. F. (1983). Financial Theory and Corporate Policy, California, Addison Wesley Publishing.
[6]	Muslumov, A. et al. (2004). Evolving market efficiency in Instabul stock exchange, Social Science Research Network, SSRN-id 8900077.
[7]	Okpara, G.C. (2010). Stock market prices and the random walk hypothesis- Further evidence from Nigeria, Journal of Economics and International Finance vol. 2 (3): PP 49-57.
[8]	Fox, A. F & Opong, K. K (1999). The impact of board changes on shareholders wealth: Some U. K evidence. Corporate Governance, An International Review, 7 (Oct): PP 385-96.
[9]	Osei, K. A (1998). Analysis of factors affecting the development of an emerging market: The case of Ghana stock exchange, AERC Research Paper No. 76, African Economic Research Consortium, Nairobi.
[10]	Adelegan, O. J. (2009). Price reactions to dividend announcements on the Nigerian stock market, AERC Research Paper 188, July.
[11]	Reilly, F. K. & Brown, K. C. (2006). Investment Analysis and Portfolio Management, 8^th edition, South Western Publishing Company.
[12]	Lintner, I. (1956). Distribution of income corporations among dividend, retained earnings and taxes, American Economic Review, 46 (May), PP 99- 118.
[13]	Pettit, B. (1972). Dividend announcements, security performance and capital market efficiency, Journal of Finance, XXVII: PP 993-1007.
[14]	Charest, G. (1978). Split information, stock returns and market efficiency I, Journal of Financial Economics, Vol. 6, PP. 265-296.
[15]	Bernanrd, V. I. & Thomas, J. K. (1990). Evidence that stock prices do not fully reflect the implications of current earnings for future earnings. Journal of Accounting and Economics, 13, PP. 305-340.
[16]	Healy, P. & Palepu, K. (1988). Earnings information conveyed by dividend initiation and omissions, Journal of Financial Economics, 21: PP. 149-175.
[17]	Asquith, P. and Mullins D. W. (1983). The impact of initiating dividend payments on shareholder’s wealth”, Journal of Business, 56: PP.77-79.
[18]	Christie, W. G. (1990). Dividend yield and expected returns: The zero puzzle, Journal of Financial Economics, 28: PP 95-125.
[19]	Dhillion, U. S. & Johnson, H. (1994). The effect of dividend changes on stock and bond prices, The Journal of Finance, 49 (1 March), PP. 281-290.
[20]	Michaely, R. et. al (1995). Initiations and omissions: Overreaction or drift? The Journal of Finance, 50 (2, June) PP. 573-607.
[21]	Amihud Y. & Murgia, M. (1997). Dividend taxes and signaling: Evidence from Germany. The Journal of Finance, LII (1, March) PP. 397-408.
[22]	Aharony, J. & Swary, I. (1989). Quarterly dividend and earnings announcements and stockholders’ returns: An empirical analysis, The Journal of Finance, 35 (1), March: PP 1- 12.
[23]	Oludoyi, S. B. (1999). Capital market efficiency and the effects of earnings announcements on share prices in Nigeria, Unpublished PhD Thesis, University of Ibadan, Nigeria.
[24]	Acker, D. (1999). Stock return volatility and dividend announcements: Review of Quantitative Finance and Accounting, 12, PP. 221-242.
[25]	Gupta, V. (2003). Announcement effects of bonus issues on equity prices: The Indian experience, Indian Journal of Finance and Research, Vol. 13, No. 1 & 2.
[26]	Uddin, M. H. & Chowdhury, G. M. (2005). Effect of dividend announcement and shareholders value. Evidence from Dhaka stock exchange, Journal of Business Research, 7, PP. 61-72.
[27]	Gunasekarage, A. & Power, D. M. (2006). Anomalous evidence in dividend announcement effect, Managerial Review, 32, PP.209-226.
[28]	Kong, S. & Taghavi, M. (2006). The effect of annual earnings announcements on the Chinese stock markets, International Advances in Economic Research, 12, PP. 318-326.
[29]	Agrawal, G. (2007). Monetary policy announcements and stock price behavior: Empirical Evidence from CNX Nifty, Decision, Vol. No. 2, PP. 133-153.
[30]	Obaidullahi, M. (1992). How do stock prices react to bonus issues? Vikalpa, Vol. 17, No. 1, PP. 17-22.
[31]	Rao, S. N. (1994). The adjustment of stock prices to corporate financial policy announcements, Finance India, Vol. 8, No. 4 PP. 941-953.
[32]	Mishra, A. K. (2009). An empirical analysis of market reaction around the bonus issues in India. Bonus Issue Paper.
[33]	Raja, S. & Clement, S. (2009). Testing the semi-strong of Indian stock market with respect to information content of stock split announcements- A study of IT industry, International Research Journal of Finance & Economics, 25, PP. 1-14
[34]	Khan, A. Q and Sana, I (2010. Testing semi-strong form of efficient market hypothesis in relation to the impact of foreign institutional investors’ (Fils)’ investments on Indian capital market, International Journals of Trade, Economics and Finance, Vol. 1, No 4: PP 373-379.
[35]	Gupta, A. & Gupta, O. P. (2007). Market reaction to stock splits: Evidence from India, The IUP Journal of Applied Finance, Vol. 13, No. 1: PP. 5-22.
[36]	Kaur, P. (2010). Valuation effect of stock split in India: Case of BSE sensex constituents, Finance India, Vol. XXIV, No. 3: PP. 813-831.
[37]	Ray, K. K. (2011). Market reaction to bonus issues and stock splits in India: An empirical study, The IUP Journal of Applied Finance, Vol. 17, No. 1: PP. 54-69.
[38]	Ogege, S., Ogbulu, O. M. & Isu, H. O. (2015). Earnings and dividend announcements, semi - strong efficiency and the Nigerian stock market: An empirical investigation, Archives of Business Research, Vol. 3, No 4, PP.104-123, doi: 10.14738/abr.34.1366.
[39]	Joseph, W. C. (1986). An alternative semi-strong form test of the efficient market hypothesis by a transfer function approach, Unpublished MBA Dissertation, Simon Fraser University, Canada.

Cite This Article

Plain Text BibTeX RIS

APA Style

Ajayi John Ayodele, Ogbulu Onyemachi Maxwell. (2017). Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis. Journal of Finance and Accounting, 5(4), 139-146. https://doi.org/10.11648/j.jfa.20170504.13

Copy | Download

ACS Style

Ajayi John Ayodele; Ogbulu Onyemachi Maxwell. Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis. J. Finance Account. 2017, 5(4), 139-146. doi: 10.11648/j.jfa.20170504.13

Copy | Download

AMA Style

Ajayi John Ayodele, Ogbulu Onyemachi Maxwell. Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis. J Finance Account. 2017;5(4):139-146. doi: 10.11648/j.jfa.20170504.13

Copy | Download

@article{10.11648/j.jfa.20170504.13,
  author = {Ajayi John Ayodele and Ogbulu Onyemachi Maxwell},
  title = {Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis},
  journal = {Journal of Finance and Accounting},
  volume = {5},
  number = {4},
  pages = {139-146},
  doi = {10.11648/j.jfa.20170504.13},
  url = {https://doi.org/10.11648/j.jfa.20170504.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20170504.13},
  abstract = {This study investigates the semi- strong efficiency theory in the Nigerian stock market. The study used daily returns from the Nigerian stock market over the period of January 1, 2005, to December 31, 2013, of which about 80 companies that retained their quoting status were used as the sample for the study. A modified transfer function approach was built to show a cause and effect relationship between the output index represented by the All-Share Index of the Nigerian Stock Exchange and the input series represented by the computed index of the selected securities in the Nigerian stock market. Findings from the study showed that the coefficient of the input index is significantly different from zero implying that investors can outperform the market based on published information hence making the market be semi-strong inefficient.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis
AU  - Ajayi John Ayodele
AU  - Ogbulu Onyemachi Maxwell
Y1  - 2017/06/21
PY  - 2017
N1  - https://doi.org/10.11648/j.jfa.20170504.13
DO  - 10.11648/j.jfa.20170504.13
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 139
EP  - 146
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20170504.13
AB  - This study investigates the semi- strong efficiency theory in the Nigerian stock market. The study used daily returns from the Nigerian stock market over the period of January 1, 2005, to December 31, 2013, of which about 80 companies that retained their quoting status were used as the sample for the study. A modified transfer function approach was built to show a cause and effect relationship between the output index represented by the All-Share Index of the Nigerian Stock Exchange and the input series represented by the computed index of the selected securities in the Nigerian stock market. Findings from the study showed that the coefficient of the input index is significantly different from zero implying that investors can outperform the market based on published information hence making the market be semi-strong inefficient.
VL  - 5
IS  - 4
ER  -

Copy | Download

Author Information

Ajayi John Ayodele

Department of Banking and Finance, Federal University of Agriculture, Abeokuta, Nigeria
Ogbulu Onyemachi Maxwell

Department of Banking and Finance, Abia State University, Uturu, Nigeria

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Ajayi John Ayodele, Ogbulu Onyemachi Maxwell. (2017). Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis. Journal of Finance and Accounting, 5(4), 139-146. https://doi.org/10.11648/j.jfa.20170504.13

Copy | Download

ACS Style

Ajayi John Ayodele; Ogbulu Onyemachi Maxwell. Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis. J. Finance Account. 2017, 5(4), 139-146. doi: 10.11648/j.jfa.20170504.13

Copy | Download

AMA Style

Ajayi John Ayodele, Ogbulu Onyemachi Maxwell. Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis. J Finance Account. 2017;5(4):139-146. doi: 10.11648/j.jfa.20170504.13

Copy | Download

@article{10.11648/j.jfa.20170504.13,
  author = {Ajayi John Ayodele and Ogbulu Onyemachi Maxwell},
  title = {Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis},
  journal = {Journal of Finance and Accounting},
  volume = {5},
  number = {4},
  pages = {139-146},
  doi = {10.11648/j.jfa.20170504.13},
  url = {https://doi.org/10.11648/j.jfa.20170504.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20170504.13},
  abstract = {This study investigates the semi- strong efficiency theory in the Nigerian stock market. The study used daily returns from the Nigerian stock market over the period of January 1, 2005, to December 31, 2013, of which about 80 companies that retained their quoting status were used as the sample for the study. A modified transfer function approach was built to show a cause and effect relationship between the output index represented by the All-Share Index of the Nigerian Stock Exchange and the input series represented by the computed index of the selected securities in the Nigerian stock market. Findings from the study showed that the coefficient of the input index is significantly different from zero implying that investors can outperform the market based on published information hence making the market be semi-strong inefficient.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - Test of the Semi-Strong Efficiency Theory in the Nigerian Stock Market: An Empirical Analysis
AU  - Ajayi John Ayodele
AU  - Ogbulu Onyemachi Maxwell
Y1  - 2017/06/21
PY  - 2017
N1  - https://doi.org/10.11648/j.jfa.20170504.13
DO  - 10.11648/j.jfa.20170504.13
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 139
EP  - 146
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20170504.13
AB  - This study investigates the semi- strong efficiency theory in the Nigerian stock market. The study used daily returns from the Nigerian stock market over the period of January 1, 2005, to December 31, 2013, of which about 80 companies that retained their quoting status were used as the sample for the study. A modified transfer function approach was built to show a cause and effect relationship between the output index represented by the All-Share Index of the Nigerian Stock Exchange and the input series represented by the computed index of the selected securities in the Nigerian stock market. Findings from the study showed that the coefficient of the input index is significantly different from zero implying that investors can outperform the market based on published information hence making the market be semi-strong inefficient.
VL  - 5
IS  - 4
ER  -

Copy | Download