A Test of Strong-Form Efficiency of the Nigerian Capital Market

This study tests whether the Nigerian capital market exists in the strong-form efficiency. It is necessitated on the belief that investors and firms can outperform the market. The empirical analysis is done employing the Autoregressive Conditional Heteroscedascity (ARCH) and Generalized Autoregressive Conditional Heteroscedascity (GARCH) models. Data were collected mainly from the Nigerian Stock Exchange, Central Bank of Nigeria Statistical Bulletin and other published sources. The study covers a period from 1986 to 2010. The findings reveal that the Nigerian capital market is weak-form efficient, suggesting that current market price of securities reflect past or historical information. The study recommends among others that the Nigerian Stock Exchange (NSE) should be closely monitored to achieve an optimal maturity level, greed and bad choices should not take the place of risk management capacity and market discipline and the Securities and Exchange Commission (SEC) should take a leading role in regulating abnormal financial activities.