The Development of the Romanian Capital Market: Evidences on Information Efficiency

by Dragota, Victor; Stoian, Andreea; Pele, Daniel Traian; Mitrica, Eugen and Bensafta, Malik 
Published in Romanian Journal of Economic Forecasting
, 2009, volume 10 issue 2, 147-160

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The Romanian capital market has considerably grown in the last decade. This study reveals new evidences regarding informational efficiency of this market. Applying Multiple Variance Ratio test to random walk hypothesis, assuming, on the one hand homoskedasticity, and on the other hand heteroskedasticity, it was found that for most of the stock prices the random walk hypothesis cannot be rejected. Consequently, the returns are not predictable by using the series of historical returns. Based on these
results, there are not enough reasons to reject the Efficient Market Hypothesis in its weak form.

Keywords: information, capital markets, market efficiency, random walk, predictability of returns, Romania
JEL Classification: G14, P34