Original Research Article | OPEN ACCESS
Security Prices as Markov Processes: Some Evidence on the Random Character of Stock Prices in the Nigeria Bourse

E. J. Idolor1 , O. Okoro2, A. G. Braimah3

1Department of Banking & Finance, Faculty of Management Sciences, University of Benin, Benin City, Edo State; 2Department of Banking & Finance Faculty of Business Administration, University of Nigeria, Enugu Campus.; 3Department of Accountancy, Auchi Polytechnic, Auchi, Edo.

For correspondence:-  E. Idolor   Email: eseoghene.idolor@uniben.edu   Tel:+2348032272040

Received: 21 Feb. 2018        Accepted: 23 March 2018        Published: 31 March 2018

Citation: Idolor EJ, Okoro O, Braimah AG. Security Prices as Markov Processes: Some Evidence on the Random Character of Stock Prices in the Nigeria Bourse. Account Tax Rev 2018; 2(1):136-151 doi:

© 2018 The authors.
This is an Open Access article that uses a funding model which does not charge readers or their institutions for access and distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0) and the Budapest Open Access Initiative (http://www.budapestopenaccessinitiative.org/read), which permit unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited..


This paper provides a method of Markovian analysis of security prices. In the study, we examine four securities selected from the finance and banking segment of the Nigerian bourse for a time frame ranging from January 4th, 2005 to December 4th, 2008. In our analysis, we define three possible states of nature (rise, drop, stable) with regards to security price change process within a modelled Markovian Framework. Our definition of the possible set of states allows both the magnitude and the direction of change to be incorporated into the analysis. The findings reveal that the Markov Chains did not provide a reliable prediction of security price movements for the period of our analysis. It is therefore recommended that we can only adopt the position that at best Markov Chains (for now) only helps to enrich our understanding of stock price behaviour, as far as the random walk hypothesis is concerned, even if the ultimate goal of prediction still proves difficult and elusive.

Keywords: Markov Chain, Markov Processes, Random Work, Stock Price Transition,

Article Tools

Share this article with

Article status: Free
Fulltext in PDF
Similar articles in Google
Similar article in this Journal:


2020; 4: 
1,   2,   3
2019; 3: 
1,   2,   3,   4
2018; 2: 
1,   2,   3,   4
2017; 1: 

News Updates