TESTING THE WEAK FORM MARKET EFFICIENCY OF BORSA ISTANBUL: AN EMPIRICAL EVIDENCE FROM TURKISH BANKING SECTOR STOCKS

Abstract

Purpose- The purpose of this study is to assess the weak form efficiency of Borsa Istanbul banking sector stocks using bank stocks listed in BIST 30. In addition to individual banking sector stocks, BIST 100 and BIST BANKS indexes are also investigated. Methodology- For this purpose, weekly adjusted closing prices of selected stocks and indexes are collected from finance.yahoo.com and investing.com. The study period covers from January 4, 2010, to December 20, 2019. Therefore, a total of 520 observations for each stock and index are analyzed using autocorrelation, run test and unit root tests such as Augmented Dickey-Fuller (ADF), Phillips-Perron test (PP) and Kwiatkowski-Phillips Schmidt-Shin (KPSS). Findings- The autocorrelation test results indicated that only VAKBAN and YAKBNK are efficient at the weak form of efficiency during the study period. On the other hand, the runs test result showed that only AKBANK and GARAN do not follow the random walk hypothesis and the other six samples are efficient at the weak form of efficiency. Finally, the unit root tests such as ADF, PP and KPSS results indicated that all samples do not follow the random walk hypothesis and they are not efficient at the weak form of market efficiency. BIST 100 and BIST BANKS indexes are inefficient according to all methods except in run test analysis. Conclusion- Consequently, the three types of tests employed in this study exhibited a controversial result and it is difficult to give a general conclusion regarding the efficiency of the BIST Banking sector in the weak form. This indicated the probability of making an abnormal return by examining the Borsa Istanbul banking sector stocks’ historical prices.

Keywords

• Autocorrelation
• banking sector
• Borsa Istanbul
• efficiency
• run test
• unit root tests

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