Application of Markov chain to share price movement in Nigeria (1985–2019)
Abstract The study evaluates the movement of share prices in the Nigerian stock market. Markov chain approach provides a successful analysis and prediction of time-series data (1985–2019) which reflects Markov dependency. The probability $$\alpha$$ α and $$\beta$$ β was estimated, and the expectatio...
| Main Authors: | , , , , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
SpringerOpen
2022-12-01
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| Series: | Future Business Journal |
| Subjects: | |
| Online Access: | https://doi.org/10.1186/s43093-022-00168-y |
| _version_ | 1797669549555843072 |
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| author | Charles O. Manasseh Nnah M. Iroha Kingsley I. Okere Ifeoma C. Nwakoby Ogochukwu C. Okanya Nnenna Nwonye Onuselogu Odidi Oliver I. Inyiama |
| author_facet | Charles O. Manasseh Nnah M. Iroha Kingsley I. Okere Ifeoma C. Nwakoby Ogochukwu C. Okanya Nnenna Nwonye Onuselogu Odidi Oliver I. Inyiama |
| author_sort | Charles O. Manasseh |
| collection | DOAJ |
| description | Abstract The study evaluates the movement of share prices in the Nigerian stock market. Markov chain approach provides a successful analysis and prediction of time-series data (1985–2019) which reflects Markov dependency. The probability $$\alpha$$ α and $$\beta$$ β was estimated, and the expectation of the monthly increase (E(I)) and decrease (E(D)) of the share price index was obtained as 5 months and 3 months, respectively. The steady-state probabilities π1 and π2 were obtained as 0.335 and 0.665, respectively, independent of the initial conditions. The results observed that as the years rolled, the monthly share prices continued to increase due to increased activity in the stock market. In addition, further investigation shows that share price movement and stock market performance influence economic performance. Based on the findings, the Nigerian government and the market authorities should initiate policies that reduce arbitragers' ability to forecast and beat the markets to forestall investors' confidence. Hence, investor property rights protection, discouragement of insider trading, and ensuring that local or domestic investors are enlightened about the stock market and the inherent benefits in Nigeria will enhance stock market efficiency and growth. |
| first_indexed | 2024-03-11T20:46:01Z |
| format | Article |
| id | doaj.art-10d78f9baf0d4a43b15da99685aa842c |
| institution | Directory Open Access Journal |
| issn | 2314-7210 |
| language | English |
| last_indexed | 2024-03-11T20:46:01Z |
| publishDate | 2022-12-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Future Business Journal |
| spelling | doaj.art-10d78f9baf0d4a43b15da99685aa842c2023-10-01T11:17:17ZengSpringerOpenFuture Business Journal2314-72102022-12-018111410.1186/s43093-022-00168-yApplication of Markov chain to share price movement in Nigeria (1985–2019)Charles O. Manasseh0Nnah M. Iroha1Kingsley I. Okere2Ifeoma C. Nwakoby3Ogochukwu C. Okanya4Nnenna Nwonye5Onuselogu Odidi6Oliver I. Inyiama7Department of Banking & Finance, University of Nigeria, Enugu CampusDepartment of Statistics, University of Nigeria, NsukkaDepartment of Economics, Banking and Finance, Gregory UniversityDepartment of Banking & Finance, University of Nigeria, Enugu CampusDepartment of Banking and Finance, Institute of Management and Technology, EnuguDepartment of Banking & Finance, University of Nigeria, Enugu CampusDepartment of Banking & Finance, University of Nigeria, Enugu CampusDepartment of Accountancy, Covenant University OtaAbstract The study evaluates the movement of share prices in the Nigerian stock market. Markov chain approach provides a successful analysis and prediction of time-series data (1985–2019) which reflects Markov dependency. The probability $$\alpha$$ α and $$\beta$$ β was estimated, and the expectation of the monthly increase (E(I)) and decrease (E(D)) of the share price index was obtained as 5 months and 3 months, respectively. The steady-state probabilities π1 and π2 were obtained as 0.335 and 0.665, respectively, independent of the initial conditions. The results observed that as the years rolled, the monthly share prices continued to increase due to increased activity in the stock market. In addition, further investigation shows that share price movement and stock market performance influence economic performance. Based on the findings, the Nigerian government and the market authorities should initiate policies that reduce arbitragers' ability to forecast and beat the markets to forestall investors' confidence. Hence, investor property rights protection, discouragement of insider trading, and ensuring that local or domestic investors are enlightened about the stock market and the inherent benefits in Nigeria will enhance stock market efficiency and growth.https://doi.org/10.1186/s43093-022-00168-yMarkov chainShare priceGDP growth rate |
| spellingShingle | Charles O. Manasseh Nnah M. Iroha Kingsley I. Okere Ifeoma C. Nwakoby Ogochukwu C. Okanya Nnenna Nwonye Onuselogu Odidi Oliver I. Inyiama Application of Markov chain to share price movement in Nigeria (1985–2019) Future Business Journal Markov chain Share price GDP growth rate |
| title | Application of Markov chain to share price movement in Nigeria (1985–2019) |
| title_full | Application of Markov chain to share price movement in Nigeria (1985–2019) |
| title_fullStr | Application of Markov chain to share price movement in Nigeria (1985–2019) |
| title_full_unstemmed | Application of Markov chain to share price movement in Nigeria (1985–2019) |
| title_short | Application of Markov chain to share price movement in Nigeria (1985–2019) |
| title_sort | application of markov chain to share price movement in nigeria 1985 2019 |
| topic | Markov chain Share price GDP growth rate |
| url | https://doi.org/10.1186/s43093-022-00168-y |
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