Market Microstructure and Information Asymmetry in the Nigerian Capital Market: a Descriptive Illustration Using the Glosten-milgrom (1985) and Kyle (1985) Models
Year: 2026
Type: article
Abstract: This study provides a descriptive illustration of information asymmetry and market microstructure in the Nigerian capital market using the Glosten–Milgrom (1985) and Kyle (1985) models. Using daily high and low prices of 40 listed equities over two consecutive trading days, the analysis demonstrates how bid–ask spreads, price adjustments, and liquidity conditions are generally observed to suggest varying degrees of informed trading. Stocks with wider spread proxies and lower liquidity generally exhibited larger forecast deviations within the illustrative framework, highlighting the potential relevance of market microstructure concepts to short-term price formation. However, no statistical relationship is estimated, and the findings should be interpreted as descriptive rather than empirical evidence of informed trading. The study emphasizes the importance of transparency, liquidity, and timely information dissemination, which may help reduce information asymmetry and improve market efficiency. The findings are illustrative and intended to demonstrate the conceptual application of these models rather than to formally test predictive performance.
Authors: Imade Omoregbe Osas, Ajao Mayowa G.
Institution: University of Benin
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W7166300566