THE EFFICIENCY OF PRICE DISCOVERY IN THE STOCK MARKET AND MACROECONOMIC VARIABLES: AN EMPIRICAL INVESTIGATION

This study seeks to determine whether aggregate stock prices in Nigeria deviate from their underlying fundamental values. The Nigerian stock market was chosen because it possesses many characteristics common to most emerging stock exchanges of the world. It is hypothesized that the empirical evidenc...

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Bibliographic Details
Published in:African review of money, finance, and banking finance, and banking, 1994-01 (1/2), p.33-55
Main Author: Ayadi, O. Felix
Format: Magazinearticle
Language:English
Subjects:
Dividends
Financial securities
Investors
Macroeconomics
Market prices
Price efficiency
Series convergence
Stock exchanges
Stock markets
Stock prices
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Summary:This study seeks to determine whether aggregate stock prices in Nigeria deviate from their underlying fundamental values. The Nigerian stock market was chosen because it possesses many characteristics common to most emerging stock exchanges of the world. It is hypothesized that the empirical evidence obtained in the United States, Britain and Japan could be explained within the context of microstructure theory. The results indicate that there are discrepancies between aggregate stock prices and their underlying fundamental values. Additional tests indicate that deviation between market and rational expectations prices is neither explainable by anticipated nor unanticipated changes in macrovariables.
ISSN:1124-3163