An empirical analysis of the weak form efficient market hypothesis of the Nairobi securities exchange

Abstract

With the increased interest in the African economy, it is vital that we measure the performance of our capital markets to know where they stand. The Efficient Market Hypothesis (EMH) seeks to test whether a stock market is efficient in either the weak, semi-strong or strong form. With Kenya being an emerging market, the weak form efficient market hypothesis was put to test by the researcher, by determining whether successive daily stock market returns on the Nairobi Securities Exchange follow a random Walk or otherwise. The EMH briefly argues that for an efficient market, future share prices and returns should be random and unpredictable, such that any information regarding a stock is quickly assimilated into the market to reflect on the new share price