Empirical Test of the Martingale Property in Stock Market: Evidence from Nigeria
Journal of Finance and Accounting
Volume 5, Issue 4, July 2017, Pages: 147-150
Received: Oct. 26, 2016; Accepted: Jan. 4, 2017; Published: Jun. 21, 2017
Views 2087      Downloads 212
Authors
Ajayi John Ayodele, Department of Banking and Finance, Federal University of Agriculture, Abeokuta, Nigeria
Ojo-Agbodu Ayodele, Department of Accounting, Lagos State University, Ojo, Nigeria
Adesina Nathaniel Olanrewaju, Department of Entrepreneurial Studies, Federal University of Agriculture, Abeokuta, Nigeria
Article Tools
Follow on us
Abstract
This paper investigates whether the martingale property holds in the Nigerian stock market. A transfer function approach was utilized for the study in which a martingale specification framework was constructed to check if the martingale property holds in line or against the specification conditions for the transfer function technique in the Nigerian stock market. Daily returns from the Nigerian stock market spanning January 1, 2005 to December 31, 2013 were used for the study. Findings from the study revealed that the Nigerian stock market does not exhibit martingale property and hence is weak- form inefficient.
Keywords
Martingale Property, Martingale Specification, Transfer Function, Stock Market
To cite this article
Ajayi John Ayodele, Ojo-Agbodu Ayodele, Adesina Nathaniel Olanrewaju, Empirical Test of the Martingale Property in Stock Market: Evidence from Nigeria, Journal of Finance and Accounting. Vol. 5, No. 4, 2017, pp. 147-150. doi: 10.11648/j.jfa.20170504.14
Copyright
Copyright © 2017 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
[1]
Samuelson, P. A (1965). Proof that properly anticipated price fluctuate randomly, Industrial Management Review, 6: PP 41-49.
[2]
Leroy, S. F. (1989). Efficient capital markets and martingales, Journal of Economic Literature. Vol. 27, No. 4, PP 1583-1621.
[3]
Kim, J. H (2004). Testing the martingale hypothesis in Asian stock prices: Evidence from a new joint variance ratio test, Department of Econometrics and Business Statistics, Monash University, Australia.
[4]
Fama, E. F. (1991). Efficient capital markets: II, Journal of Finance, 46 (5, December): PP 1575-617.
[5]
Lo, A. and Mackinlay, A. C (1988). Stock market prices do not follow random walk: Evidence from a simple specification test. Review of Financial Studies 7 (3): PP 1-8.
[6]
Kim, M. J. (1991): Mean Reversion in Stock Prices? A Reappraisal of the Empirical Evidence, Review of Economic Studies, 58: PP. 515-528. Frennberg & Hansson (1993).
[7]
Ayadi, O. F. and Pyun, C. S (1994). An application of variance ratio test to the Korean securities market. Journal of Banking and Finance, 18 (4): PP.643-658.
[8]
Huang B. N. (1995): Do Asian stock market prices follow random walk? Evidence from variance ratio test, Applied Financial Economics, 5: PP. 251-256.
[9]
Malliaropulos, D., & Priestley R. (1999): Mean revision in Southeast Asian stock markets, Journal of Empirical Finance, 6: PP 355-384.
[10]
Chang, K. P. & Ting K. S (2000): A variance ratio test of the random walk hypothesis for Taiwan's stock market, Applied Financial Economics, 10: PP.525- 532.
[11]
Ryoo, H. J. & Smith, G. (2002): Korean Stock prices under price limits: variance ratio Tests of random walks, Applied Financial Economics, 12: PP. 475-484.
[12]
Nankervis, J. C. & Savin, N. E. (2010). Testing the serial correlation generalized Andrews- Ploberger tests, Journal of Economic and Business Statistics 28, PP. 246-255.
[13]
Peter, C. B. & Sainan, J. (2013). Testing the martingale hypothesis, Cowles Foundation Discussion Paper No. 1912, Yale University, New Haven.
[14]
Pham, T. P., Kim, J. H. & Jurdi, D. (2015). Stock return weak-form efficiency of ASEAN stock markets, Department of Economics, La Trobe University, Australia.
[15]
Bilello, C. (2016). Martingales and markets accessed on-line @ http://pension Partners. com/martingales on 19th November.
[16]
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.
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186