TESTING MARKET EFFICIENCY VIA DECOMPOSITION OF STOCK RETURN. APPLICATION TO ROMANIAN CAPITAL MARKET

Daniel Traian Pele · Virgil Voineagu

35 citations0/0 files storedRePEc: Research Papers in Economics

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Financial Markets and Investment Strategies Financial Risk and Volatility Modeling Stock Market Forecasting Methods

Abstract

In this paper we are investigating the market efficiency using a model which decomposes the stock return into two components: a stochastic trend and a white noise component. This model is tested for the Romanian Capital Market, considering the time series of BET (Bucharest Exchange Trade) Index. The conclusion is that for our data sample we cannot reject the efficient market hypothesis for Romanian Capital Market. Classificaefficient market hypothesis, random walk, stochastic trend, ARIMA models, Romanian Capital Market, BET.tion-JEL: C42, G14

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References

1970EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK*2012The Econometrics of Financial Markets 1961Rational Expectations and the Theory of Price Movements 1991Efficient Capital Markets: II 1997The variation of certain speculative prices 1988Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test 1988Permanent and Temporary Components of Stock Prices 1993A simple multiple variance ratio test

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2009THE DEVELOPMENT OF THE ROMANIAN CAPITAL MARKET: EVIDENCES ON INFORMATION EFFICIENCY 2009TESTING THE EFFICIENCY MARKET HYPOTHESIS FOR THE ROMANIAN STOCK MARKET 2009MODELING HEAVY-TAILED STOCK INDEX RETURNS USING THE GENERALIZED HYPERBOLIC DISTRIBUTION

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