INTRADAY MARKET EFFICIENCY FOR A TYPICAL CENTRAL AND EASTERN EUROPEAN STOCK MARKET: THE CASE OF ROMANIA

Investors increasingly focus on high frequency data for fine-tuning portfolio management decisions in developed, emerging and frontier markets alike. However, the behavior of intraday price movements in the Central and Eastern European stock markets is insufficiently understood. We obtain a large sample of intraday prices in a typical Central and Eastern European stock market and we thoroughly investigate it for dependencies and economic profit opportunities. We determine that intraday price movements present important deviations from a random walk. Despite this, we find that investors are generally unable to use the dependencies imbedded in the price movements to gain economic profits when using trading strategies derived from three popular technical analysis indicators. Overall, we cannot reject the Efficient Market Hypothesis for intraday price movements in Romania. This implies that, because of the existing market frictions, trading on high frequency data is not feasible in the stock market of Romania, at least when using popular technical analysis indicators.