Testing the Random Walk Theory in the Nigerian Stock Market

Clement C. M. Ajekwe, Adzor Ibiamke, Habila Abel Haruna


This study tests the random walk theory in the Nigerian stock market by analyzing whether stock returns follow a random walk distribution. The study employs the daily returns of the Top 20 most performing stocks on the NSE for the period January 1st 2010 to December 31st 2014. Autocorrelation and runs test were employed for hypothesis testing.  Based on our analysis, we found that the daily stock returns of the 20 most active stocks on the Nigerian stock market are randomly distributed indicating that Nigerian Stock market is informational efficient at the weak form level. The implication of the finding is that no one can fool the market consistently for a long time by trading on the basis of past information such as historical stock prices. The study recommends that more efforts should be made to reposition the market to attract more investible funds from domestic and foreign investors.


Capital Market; Efficiency level; Nigerian Stock Exchange; random walk

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