A TEST OF MARKET MICRO-STRUCTURE IN THE NIGERIAN CAPITAL MARKET
Osamudiamen Lydia Wallace and Osazee Godwin Omorokunwa
Volume 5 Issue 2
Abstract
This study analyzes the microstructure of the Nigerian stock market, using the Glosten-Milgrom model of information asymmetry. Data from the stock prices of one hundred and five publicly traded companies during May 2023 on the 4th and 5th were collected and analyzed. The results show that the model accurately predicted the stock prices of sixty-eight listed companies, which challenges the random walk theory of stock price fluctuations. While there was some variance for around thirty-seven companies, the model provided a reasonable projection of the following day's stock price. This study contributes significantly to our understanding of how investors and the uninformed in the Nigerian Stock Market can gain insight into the following day's stock price projection. Further study is recommended to explore alternative models that could contribute to price discovery and reduce information asymmetry in the trading processes of the Nigerian security market. Keywords: Test, Market, Micro-Structure, Capital Market
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