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A Multicriteria Extension of the Efficient Market Hypothesis

Author

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  • Francisco Salas-Molina

    (Department of Management “Juan José Renau Piqueras”, Faculty of Economics, Universitat de València, Av. Tarongers s/n, 46022 Valencia, Spain)

  • 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)

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.

Suggested Citation

  • Francisco Salas-Molina & David Pla-Santamaria & Fernando Mayor-Vitoria & Maria Luisa Vercher-Ferrandiz, 2021. "A Multicriteria Extension of the Efficient Market Hypothesis," Mathematics, MDPI, vol. 9(6), pages 1-16, March.
    • Handle: RePEc:gam:jmathe:v:9:y:2021:i:6:p:649-:d:519533
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    References listed on IDEAS

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    2. Ana Garcia-Bernabeu & Adolfo Hilario-Caballero & David Pla-Santamaria & Francisco Salas-Molina, 2020. "A Process Oriented MCDM Approach to Construct a Circular Economy Composite Index," Sustainability, MDPI, vol. 12(2), pages 1-14, January.
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    Cited by:

    1. Antonio Jiménez-Martín, 2022. "Special Issue “Recent Advances and Applications in Multi Criteria Decision Analysis”," Mathematics, MDPI, vol. 10(13), pages 1-3, July.

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