TESTING THE RANDOM WALK HYPOTHESIS (RWH) IN THE NIGERIAN STOCK EXCHANGE

Abstract
This study uses annual data spanning over 1986 - 2018 to test the existence of random walk hypothesis in the Nigerian stock market. Findings from the study reveal that the three variables of the study are not stationary at level, but are stationary only at first difference. However, ASI and MCP that were stationary at levels when KPSS was employed with intercept and trend included in the estimation. This suggests that the Nigerian stock market follows a random walk and as such, stock prices during the previous years do not contain information that are relevant for predicting current prices or forecasting future prices. In other word, the market is not certainly predictable, as such, financial dealers may not be able to take advantage of past behavior of the market in their current decision on sales and purchases of stocks. Therefore, the chances of dealers in the making excess return are very minimal.

Keywords: Random Walk, All share index, market capitalization, Stock Exchange