Weak Form Efficiency of the Insurance Industry: Empirical Evidence from Nigeria

Abstract

This paper evaluated the insurance sector of Nigeria Stock Exchange (NSE) for evidence weak-form efficiency using daily returns from January 2009 to February 2016. The study employs descriptive analysis, non-parametric runs test and autocorrelation function as well as Ljung-Box Q statistics in conducting the evaluation. Descriptive statistics of the insurance sector return series showed negative skewness and leptokurtic distribution. Estimates from the Jarque-Bera normality test showed that the insurance sector returns did not follow normal distribution. Results of the runs test reject null hypothesis of randomness in the return series of the insurance sector in the period studied. Furthermore, the autocorrelation functions and the Ljung-Box Q tests provide evidence of serial correlation in the stock returns of the insurance sector. Overall results from the study suggested that the insurance sector of NSE is not weak-form efficient. Consequently, technical analysis on the insurance sector of the NSE may not be fruitless.

A New Look at Weekdays Effect of Stock Prices in the Weak Form: Evidence from Nigerian Stock Exchange

“…Onwukwe and Ali [24] investigated market efficiency in the insurance firms quoted in the Nigerian stock exchange, using insurance sector returns from 2009 to 2016 with descriptive analysis, run test and autocorrelation as techniques for the analysis. The normality results from Jarque-Bera indicated non-normal distribution.…”

“…The stock market returns from 1990 to 2010 revealed that, the security market is inefficient in the weak form, the security market returns from 2010 to 2017 revealed the market is efficient in the weak form. Still in the Nigerian stock exchange, [23,24] investigated weak form of market efficiency and found non-random situation. Overall, there has not been consensus as to the intensity of efficiency in the NSE.…”

Does The Crude Palm Oil Market Walk Randomly?

“…Fama (1970) distinguished the market efficiency into three categories: market efficiency in a weak form, market efficiency in a semistrong form and market efficiency in a strong form. The main component to determine the type of efficiency is information (Khajar, 2010;Taungke & Supramono, 2015;Robiyanto, 2017;Onwukwe & Ali, 2018). Market declared as being efficient in a weak form if the price of an existing asset reflects all past information (Supramono, Widhiastuti, & Utami, 2017).…”

“…While Jain, Vyas, & Roy (2013) conducted a study on the stock mar-ket in India, Robiyanto (2015) conducted a study on the stock market in ASEAN and the precious metals market, while Dima & Miloº (2009) did their study in the Romanian stock market. The other studies also were done in the bond market, i.e., Robiyanto (2017) and Onwukwe & Ali (2018) reviewing the efficiency of the insurance market in Nigeria.…”

“…The CPO market is not expected to walk randomly because the capital markets and other financial markets are often found to be inefficient in a weak form (Dickinson & Peterson, 1995;Rita, 2009;Jain, Vyas, & Roy, 2013;Shah & Ahmed, 2014;Hersugondo et al, 2016;Robiyanto, 2017;Onwukwe & Ali, 2018). Then the CPO market will also experience the same thing.…”