Passive portfolio management . the game - theoretic capital asset pricing model

The present paper sets out to underline passive portfolio management on the Romanian capital market starting from the Capital Asset Pricing Model (CAPM) derived from the efficient market hypothesis, with no assumptions about the beliefs or preferences of investors. The efficient market hypothesis says that a speculator with limited resources cannot beat a particular index by a substantial factor. The developed model underlines the fact that the difference between the average returns of a portfolio and the index should approximate the difference between the portfolio’s covariance with the index’s variance. The game in this paper is a two-player perfectinformation sequential game, being a precise and pure mathematical object, connected to the world by an auxiliary hypothesis, Cournot’s principle. The application of this model on the Romanian capital market has the purpose to test its validity, taking into consideration the specific influences and conditions of the national capital market.