A Multicriteria Extension of the Efficient Market Hypothesis

Francisco Salas-Molina, David Pla-Santamaria, Fernando Mayor-Vitoria and Maria Luisa Vercher-Ferrandiz
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David Pla-Santamaria: Department of Economics and Social Sciences, Higher Polytechnic School of Alcoy, Universitat Politècnica de València, Ferrándiz y Carbonell, 03801 Alcoy, Spain
Fernando Mayor-Vitoria: Department of Economics and Social Sciences, Higher Polytechnic School of Alcoy, Universitat Politècnica de València, Ferrándiz y Carbonell, 03801 Alcoy, Spain
Maria Luisa Vercher-Ferrandiz: Department of Economics and Social Sciences, Higher Polytechnic School of Alcoy, Universitat Politècnica de València, Ferrándiz y Carbonell, 03801 Alcoy, Spain

Mathematics, 2021, vol. 9, issue 6, 1-16

Abstract: Challenging the Efficient Market Hypothesis (EMH) has been a recurrent topic for researchers and practitioners since its formulation. Hundreds of empirical studies claim to either prove or disprove the EMH by means of a number of heterogeneous methods. Even though the EMH is usually adjusted to a measure of risk, there is a lack of a formal analysis within a multiple-criteria context. In this paper, we propose a extension of the EMH that accommodates the foundations of multiple-criteria decision analysis. To this end, we rely on a family of parametric signed dissimilarity measures to assess multidimensional performance differences. Since normalization is a critical step in our approach to avoid meaningless comparisons, we present two novel theoretical results connecting different normalization techniques. This multicriteria extension provides a common framework on which to add empirical evidence regarding the EMH testing.

Keywords: efficient market hypothesis; multiple-criteria test; signed measures; normalization (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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