Do Investors Make Abnormal Returns Consistently? An Econometric Investigation in the Nigerian Capital Market

Ayakeme Ebiwarefa Whisky,Chinedu B Ezirim

doi:10.5430/ijfr.v5n2p115

Abstract

The study focused on the intriguingly interesting controversy whether “investors can make abnormal return consistently in the Nigerian capital market?” It employs monthly return data in the Nigerian stock exchange to estimate a non-parametric model which shows that the observed z-statistic is larger than the critical at 5% in all the sub-periods and the overall period. The study thus concludes that investors can make abnormal returns in the Nigerian capital market.

Highlights

The contention whether investors can make abnormal returns consistently has assumed topical interest in capital market literature since Fama (1965) popularized the efficient market hypothesis
The kernel of the efficient market theory argues that no investor can make abnormal return given a free flow of information set to all market participants
In testing whether investors in Nigerian capital market can make abnormal returns, we essentially computed abnormal returns relying upon the formula provided by Adams, et al (1993) to calculate both the benchmark and abnormal returns for the sub-periods (i.e. 2006-2007; 2008-2009; 2010-2011)

Summary

Introduction

The contention whether investors can make abnormal returns consistently has assumed topical interest in capital market literature since Fama (1965) popularized the efficient market hypothesis. It is a truism that market conditions, as dynamic as they are relative to the prevailing economic circumstances could impact changes which could alter well known positions and permit investors the leverage of earning higher than average returns in the market. Whether such earnings are short-lived or sustainable enough to obviate the relevance of the efficient market theory is contentious. The confirmation of the Nigerian capital market as either weak form efficient or semi-strong form efficient presupposes that investors cannot make abnormal returns consistently

Methods

Results

Conclusion