Testing the Informational Efficiency on the Romanian Financial Market
The classical models of portfolio selection could not be applied on a market were the efficient market hypothesis is not valid (at least in a "weak" sense). The aim of this paper is to enlighten the difficulties of portfolio construction in a financial market with institutional and structu...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2006-01-01
|
| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/16.pdf
|
| _version_ | 1818501880327700480 |
|---|---|
| author | Bogdan Dima Marilen Pirtea Aurora Murgea |
| author_facet | Bogdan Dima Marilen Pirtea Aurora Murgea |
| author_sort | Bogdan Dima |
| collection | DOAJ |
| description | The classical models of portfolio selection could not be applied on a market were the efficient market hypothesis is not valid (at least in a "weak" sense). The aim of this paper is to enlighten the difficulties of portfolio construction in a financial market with institutional and structural deficiencies, like the Romanian one, and to propose an alternative approach to the problem. The main features of our analysis are: 1) an empirical test for the efficient market hypothesis in the Romanian financial market case; 2) a critical distinction between the concept of "risk" and the concept of "incertitude"; 3) the use of the individual yield/risk ratio versus the market one as a selection variable; 4) the renouncement at the use in the selection procedure of an "non-risky" asset; 5) an example of the proposed selection procedure. The output of this approach could be resumed by the thesis that, even in a situation when the financial market is affected by severe disfunctions, there is a possibility to build an "optimal" portfolio based on a yield-risk arbitrage inside an efficiency frontier and to obtain a "good" schema of an financial placement, in spite of the limited possibilities for a efficient portfolio management. |
| first_indexed | 2024-12-10T21:02:22Z |
| format | Article |
| id | doaj.art-5472c344390e4a878193f64b603780ed |
| institution | Directory Open Access Journal |
| issn | 1841-8678 1844-0029 |
| language | English |
| last_indexed | 2024-12-10T21:02:22Z |
| publishDate | 2006-01-01 |
| publisher | General Association of Economists from Romania |
| record_format | Article |
| series | Theoretical and Applied Economics |
| spelling | doaj.art-5472c344390e4a878193f64b603780ed2022-12-22T01:33:45ZengGeneral Association of Economists from RomaniaTheoretical and Applied Economics1841-86781844-00292006-01-01XIII118418678Testing the Informational Efficiency on the Romanian Financial MarketBogdan Dima0Marilen Pirtea1Aurora Murgea2 Universitatea de Vest Timisoara The classical models of portfolio selection could not be applied on a market were the efficient market hypothesis is not valid (at least in a "weak" sense). The aim of this paper is to enlighten the difficulties of portfolio construction in a financial market with institutional and structural deficiencies, like the Romanian one, and to propose an alternative approach to the problem. The main features of our analysis are: 1) an empirical test for the efficient market hypothesis in the Romanian financial market case; 2) a critical distinction between the concept of "risk" and the concept of "incertitude"; 3) the use of the individual yield/risk ratio versus the market one as a selection variable; 4) the renouncement at the use in the selection procedure of an "non-risky" asset; 5) an example of the proposed selection procedure. The output of this approach could be resumed by the thesis that, even in a situation when the financial market is affected by severe disfunctions, there is a possibility to build an "optimal" portfolio based on a yield-risk arbitrage inside an efficiency frontier and to obtain a "good" schema of an financial placement, in spite of the limited possibilities for a efficient portfolio management. http://store.ectap.ro/articole/16.pdf non-efficient financial marketportfolio selectionriskincertitude |
| spellingShingle | Bogdan Dima Marilen Pirtea Aurora Murgea Testing the Informational Efficiency on the Romanian Financial Market Theoretical and Applied Economics non-efficient financial market portfolio selection risk incertitude |
| title | Testing the Informational Efficiency on the Romanian Financial Market |
| title_full | Testing the Informational Efficiency on the Romanian Financial Market |
| title_fullStr | Testing the Informational Efficiency on the Romanian Financial Market |
| title_full_unstemmed | Testing the Informational Efficiency on the Romanian Financial Market |
| title_short | Testing the Informational Efficiency on the Romanian Financial Market |
| title_sort | testing the informational efficiency on the romanian financial market |
| topic | non-efficient financial market portfolio selection risk incertitude |
| url |
http://store.ectap.ro/articole/16.pdf
|
| work_keys_str_mv | AT bogdandima testingtheinformationalefficiencyontheromanianfinancialmarket AT marilenpirtea testingtheinformationalefficiencyontheromanianfinancialmarket AT auroramurgea testingtheinformationalefficiencyontheromanianfinancialmarket |