Market Efficiency and Nonlinearity: An Empirical Examination of the BET Index on the Bucharest Stock Exchange

Authors- Genia-Iulia Tabără

Abstract-This study investigates the efficiency of the Bucharest Stock Exchange (BSE) by analyzing the behavior of the BET Index and its Log Return, through various statistical and econometric tests. The research pri- marily focuses on evaluating the market efficiency of the BET index and its return, utilizing tools such as Run Test, Portmanteau (Ljung-Box) Test, BDS Test, Lo’s Modified R/S Test, and the Hurst-Mandelbrot Classical R/S Test. These methods are employed to examine the random walk hypothesis and detect any nonlinear dependencies within the BET index and return’s series, which are critical indicators of market efficiency. Descriptive statistics and distributional analyses are conducted to understand the underlying characteristics of the index and returns, including normality and the presence of fat tails. The findings reveal significant insights into the behavior of the BET index, contributing to the ongoing debate regarding the efficiency of frontier and emerging markets. The results suggest that there are noticeable deviations that indicate potential inefficiencies, particularly in the form of autocorrelation and nonlinear dependen- cies. This paper provides a comprehensive analysis of the BET index and its return, offering valuable implications for investors and policymakers regarding the efficiency of the Romanian stock market. The study’s findings underscore the complexity of market dynamics in emerging economies and suggest ave- nues for further research into the factors contributing to these inefficiencies.

DOI: /10.61463/ijset.vol.12.issue5.251