Application of Markov chain to share price movement in Nigeria (1985–2019)

Abstract The study evaluates the movement of share prices in Nigerian stock market. Markov chain approach provides a successful analysis and prediction time-series data (1985–2019) which reflects dependency. probability $$\alpha$$ α $$\beta$$ β was estimated, expectation monthly increase (E(I)) decrease (E(D)) price index obtained as 5 months 3 months, respectively. steady-state probabilities π 1 2 were 0.335 0.665, respectively, independent initial conditions. results observed that years rolled, continued to due increased activity In addition, further investigation shows market performance influence economic performance. Based on findings, government authorities should initiate policies reduce arbitragers' ability forecast beat markets forestall investors' confidence. Hence, investor property rights protection, discouragement insider trading, ensuring local or domestic investors are enlightened about inherent benefits Nigeria will enhance efficiency growth.