Testing the Random Walk Theory on Share Prices At the Nairobi Stock Exchange
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Date
2007-11Author
Githiga, Martin
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
This study examine whether share prices of companies trading at the Nairobi Stock
Exchange follow a random walk trend. We provide evidence that expert analysis can
not be used to earn investors an abnormal profit at the exchange. The autocorrelation
model was used to test the random walk hypothesis. A sample of sixteen stocks was
drawn from companies that comprised the NSE 20 share index during the five year
period between September 2003 and August 2007.
Weekly average prices are shown to exhibit significant random walk behavior in the
sense that the autocorrelation coefficient was less than 0.5 but more than -0.5
throughout the period. The results of the study confirmed that stock prices followed a
random walk and that one cannot predict future prices based on the past price trends.
Publisher
University of Nairobi, School of Business
Description
MBA Thesis