Testing Market Efficiency Via Decomposition Of Stock Return. Application To Romanian Capital Market 

by Pele, Daniel Traian and Voineagu, Virgil
Published in Romanian Journal of Economic Forecasting
, 2008, volume 9 issue 3, 63-79

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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.

Keywords: efficient market hypothesis, random walk, stochastic trend, ARIMA models, Romanian Capital Market, BET.
JEL Classification:
C42, G14