Research Article
BibTex RIS Cite

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

Year 2020, , 236 - 249, 30.09.2020

Suadiq Mehammed Hailu Gamze Vural

https://doi.org/10.17261/Pressacademia.2020.1291

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

References

  • Aga, M., & Kocaman, B. (2008). Efficient market hypothesis and emerging capital markets: empirical evidence from Istanbul Stock Exchange. International Research Journal of Finance and Economics, 13(1), 131-144.
  • Akgün, A., & Şahin, I. E. (2017). The Testing of Efficient Market Hypothesis in Borsa Istanbul. Analele Universitatii" Constantin Brancusi" din Targu Jiu. Serie Litere si Stiinte Sociale, (2), 35-48.
  • Aliyev, F. (2019). Testing Market Efficiency with Nonlinear Methods: Evidence from Borsa Istanbul. International Journal of Financial Studies, 7(2), 27.
  • Al-Jafari, M. K. (2013). The random walk behavior and weak-form efficiency of the Istanbul Stock Market 1997-2011: empirical evidence. International Journal of Management, 30(3), 169.
  • Alparslan, S. M. (1989) Tests of Weak Form Efficiency in İstanbul Stock Exchange, Unpublished MBA Thesis, Bilkent University,Ankara, Turkey.
  • Arltová ,M. & Fedorová, D. (2016). Selection of unit root test on the basis of length of the time series and value of AR (1) parameter. Statistika, 96(3), 3.
  • Autocorrelation. BusinessDictionary.com. Retrieved December 18, 2019, from BusinessDictionary.com website: http://www.businessdictionary.com/definition/autocorrelation.html
  • Aydin, N., Başar, M. & Coşkun, M. (2015). Finansal Yönetim. Detay Yayıncılık, 2. Baskı, Ankara.
  • Balaban, E. (1995). Informational efficiency of the Istanbul Securities Exchange and some rationale for public regulation. The Central Bank of The Republic of Turkey Research Department Discussion Paper, 9502, 39-67.
  • Batten, J. A., Fetherston, T. A., & Szilagyi, P. G. (Eds.). (2004). European fixed income markets: Money, bond, and interest rate derivatives (Vol. 665). John Wiley & Sons.
  • Bauer, G. (2004). A Taxonomy of Market Efficiency. Bank of Canada Financial System Review, 37-40.
  • BIST (2019). Indices. Retrieved on December 17, 2019 from https://www.borsaistanbul.com/en/indices
  • BIST (2019). Markets. Retrieved on December 17, 2019 from https://www.borsaistanbul.com/en/products-and-markets/markets
  • Buguk, C., & Brorsen, B. W. (2003). Testing weak-form market efficiency: Evidence from the Istanbul Stock Exchange. International review of financial analysis, 12(5), 579-590.
  • Bulut, Ü. (2016). Testing the Weak Form of the Efficient Market Hypothesis: The Case of Turkey.
  • Canbaş, S., & Doğukanlı, H. (2017). Finansal pazarlar: finansal kurumlar ve sermaye pazarı analizleri. Altıncı Baskı. Karahan Kitabevi.
  • Carp, L. (2012). Can stock market development boost economic growth? Empirical evidence from emerging markets in Central and Eastern Europe. Procedia Economics and Finance, 3, 438-444.
  • Chambers, N. (2006). The Creation, Development And Operation Of The Istanbul Stock Exchange. Mali Cozum Dergisi (Ozel Sayi), 76, 141-77.
  • Cooray, A., & Wickremasinghe, G. (2007). The efficiency of emerging stock markets: Empirical evidence from the South Asian region. The Journal of Developing Areas, 171-183.
  • Corder, G. W., & Foreman, D. I. (2014). Nonparametric statistics: A step-by-step approach. John Wiley & Sons.
  • Daver, G., Karacaer, M., & Hülya, Ü. N. L. Ü (2013). Testing of BIST And TurkDEX: Random Walk and Market Efficiency. International Journal of Economics and Finance Studies, 5(2), 10-22.
  • Dickinson, J. P., & Muragu, K. (1994). Market efficiency in developing countries: A case study of the Nairobi Stock Exchange. Journal of Business Finance & Accounting, 21(1), 133-150.
  • Dimson, E., & Mussavian, M. (1998). A brief history of market efficiency. European financial management, 4(1), 91-103.
  • Dufour, J. M., Lepage, Y., & Zeidan, H. (1982). Nonparametric testing for time series: a bibliography. Canadian Journal of Statistics, 10(1), 1-38.
  • Eviews.com. (2019). User’s Guide : Basic Data Analysis : Series : Correlogram. Retrived December 24, 2019 from http://www.eviews.com/help/helpintro.html#page/content/series-Correlogram.html
  • Fama, E. F. (1965). The behavior of stock-market prices. The journal of Business, 38(1), 34-105.
  • Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The journal of Finance, 25(2), 383-417.
  • Gozbasi, O., Kucukkaplan, I., & Nazlioglu, S. (2014). Re-examining the Turkish stock market efficiency: Evidence from nonlinear unit root tests. Economic Modelling, 38, 381-384.
  • Gujarati, D. N. (2009). Basic econometrics. Tata McGraw-Hill Education.
  • Harvey, A. C. (2005). A unified approach to testing for stationarity and unit roots. Identification and Inference for Econometric Models, 403-25.
  • Investment Support and Promotion Agency of Turkey (2015). The Financial Services Sector in Turkey. Retrieved from https://www.flandersinvestmentandtrade.com/export/sites/trade/files/market_studies/The%20Financial%20Services%20Sector%20in%20Turkey.pdf
  • Kapusuzoglu, A. (2013). Testing weak form market efficiency on the Istanbul stock exchange (ISE). International Journal of Business Management and Economic Research, 4(2), 700-705.
  • Kendall, M. G., & Hill, A. B. (1953). The analysis of economic time-series-part i: Prices. Journal of the Royal Statistical Society. Series A (General), 116(1), 11-34.
  • Khandoker, M. S. H., Siddik, M. N. A., & Azam, M. (2011). Tests of weak-form market efficiency of Dhaka stock exchange: evidence from bank sector of Bangladesh. Interdisciplinary Journal of Research in Business, 1(9), 47-60.
  • Kiliç, Ö. G. D. S. B. (2005). Test of the weak form efficient market hypothesis for the Istanbul stock exchange by markov chains methodology. Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 14(1), 333-342.
  • Malkiel, B. G. (1989). Efficient market hypothesis. In Finance (pp. 127-134). Palgrave Macmillan, London.
  • Mobarek, A., & Keasey, K. (2000, May). Weak-form market efficiency of an emerging Market: Evidence from Dhaka Stock Market of Bangladesh. In ENBS Conference held on Oslo (pp. 1-30).
  • Muslumov, A., Aras, G., & Kurtulus, B. (2003). Evolving market efficiency in istanbul stock exchange. Istanbul Technical University Selected Articles, 271-291.
  • Nkoro, E., & Uko, A. K. (2016). Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation. Journal of Statistical and Econometric Methods, 5(4), 63-91.
  • Palachy, S. (2019). Towards Data Science. Detecting stationarity in time series data. Retrive on Dcember 2, 2019 from https://towardsdatascience.com/detecting-stationarity-in-time-series-data-d29e0a21e638
  • Panas, E. E. (1990). The behaviour of Athens stock prices. Applied Economics, 22(12), 1715-1727.
  • PDP (2019). Indexes. Retrieved on December 17, 2019 from. https://www.kap.org.tr/en/Endeksler
  • Pilbeam, K. (2018). Finance & financial markets. Macmillan International Higher Education.
  • Roberts, H. V. (1959). Stock-market" patterns" and financial analysis: methodological suggestions. The Journal of Finance, 14(1), 1-10.
  • Samuelson, P. A. (1965), Proof that properly anticipated prices fluctuate randomly, Industrial Management Review 6(2), 41–49.
  • Saymeh, A. A. F. (2013). Empirical Testing for Weak Form Hypothesis of Emerging Capital Markets: A Comparative study of Jordan’s ASE and Turkey’s BORSA IST. International Journal of Empirical Finance, 1(2), 20-26.
  • Sjö, B. (2008). Testing for unit roots and cointegration. Lectures in Modern Econometric Time series Analysis.
  • Stengos, T., & Panas, E. (1992). Testing the efficiency of the Athens Stock Exchange: Some results from the banking sector. Empirical Economics, 17(2), 239-252.
  • Stephanie (2016). Statistics How To. Serial Correlation / Autocorrelation: Definition, Tests. Retrieved December 21, 2019, from https://www.statisticshowto.datasciencecentral.com/serial-correlation-autocorrelation/
  • Stephanie (2018). Statistics How To. Ljung Box Test: Definition. Retrieved December 21, 2019, from https://www.statisticshowto.datasciencecentral.com/ljung-box-test/
  • Syczewska, E. M. (2010). Empirical power of the Kwiatkowski-Phillips-Schmidt-Shin test (No. 45).
  • Tas, O., Atac, C.G., (2019). Testing random walk hypothesis for Istanbul stock exchange. PressAcademia Procedia (PAP), V.9, p.48-53
  • Tintner, G. (1965). Introduction to Econometrics. Vvedenie v ekonometriku, 361.
  • Virmani, V. (2004). Unit Root Tests: Results from some recent tests applied to select Indian macroeconomic variables.
  • Wang, Y. (2003). Nonparametric tests for randomness. ECE, 461, 1-11.
  • Yücel, Ö. (2016). Finansal piyasa etkinliği: Borsa İstanbul üzerine bir uygulama. International Review of Economics and Management, 4(3)

Year 2020, , 236 - 249, 30.09.2020

Suadiq Mehammed Hailu Gamze Vural

https://doi.org/10.17261/Pressacademia.2020.1291

Abstract

References

  • Aga, M., & Kocaman, B. (2008). Efficient market hypothesis and emerging capital markets: empirical evidence from Istanbul Stock Exchange. International Research Journal of Finance and Economics, 13(1), 131-144.
  • Akgün, A., & Şahin, I. E. (2017). The Testing of Efficient Market Hypothesis in Borsa Istanbul. Analele Universitatii" Constantin Brancusi" din Targu Jiu. Serie Litere si Stiinte Sociale, (2), 35-48.
  • Aliyev, F. (2019). Testing Market Efficiency with Nonlinear Methods: Evidence from Borsa Istanbul. International Journal of Financial Studies, 7(2), 27.
  • Al-Jafari, M. K. (2013). The random walk behavior and weak-form efficiency of the Istanbul Stock Market 1997-2011: empirical evidence. International Journal of Management, 30(3), 169.
  • Alparslan, S. M. (1989) Tests of Weak Form Efficiency in İstanbul Stock Exchange, Unpublished MBA Thesis, Bilkent University,Ankara, Turkey.
  • Arltová ,M. & Fedorová, D. (2016). Selection of unit root test on the basis of length of the time series and value of AR (1) parameter. Statistika, 96(3), 3.
  • Autocorrelation. BusinessDictionary.com. Retrieved December 18, 2019, from BusinessDictionary.com website: http://www.businessdictionary.com/definition/autocorrelation.html
  • Aydin, N., Başar, M. & Coşkun, M. (2015). Finansal Yönetim. Detay Yayıncılık, 2. Baskı, Ankara.
  • Balaban, E. (1995). Informational efficiency of the Istanbul Securities Exchange and some rationale for public regulation. The Central Bank of The Republic of Turkey Research Department Discussion Paper, 9502, 39-67.
  • Batten, J. A., Fetherston, T. A., & Szilagyi, P. G. (Eds.). (2004). European fixed income markets: Money, bond, and interest rate derivatives (Vol. 665). John Wiley & Sons.
  • Bauer, G. (2004). A Taxonomy of Market Efficiency. Bank of Canada Financial System Review, 37-40.
  • BIST (2019). Indices. Retrieved on December 17, 2019 from https://www.borsaistanbul.com/en/indices
  • BIST (2019). Markets. Retrieved on December 17, 2019 from https://www.borsaistanbul.com/en/products-and-markets/markets
  • Buguk, C., & Brorsen, B. W. (2003). Testing weak-form market efficiency: Evidence from the Istanbul Stock Exchange. International review of financial analysis, 12(5), 579-590.
  • Bulut, Ü. (2016). Testing the Weak Form of the Efficient Market Hypothesis: The Case of Turkey.
  • Canbaş, S., & Doğukanlı, H. (2017). Finansal pazarlar: finansal kurumlar ve sermaye pazarı analizleri. Altıncı Baskı. Karahan Kitabevi.
  • Carp, L. (2012). Can stock market development boost economic growth? Empirical evidence from emerging markets in Central and Eastern Europe. Procedia Economics and Finance, 3, 438-444.
  • Chambers, N. (2006). The Creation, Development And Operation Of The Istanbul Stock Exchange. Mali Cozum Dergisi (Ozel Sayi), 76, 141-77.
  • Cooray, A., & Wickremasinghe, G. (2007). The efficiency of emerging stock markets: Empirical evidence from the South Asian region. The Journal of Developing Areas, 171-183.
  • Corder, G. W., & Foreman, D. I. (2014). Nonparametric statistics: A step-by-step approach. John Wiley & Sons.
  • Daver, G., Karacaer, M., & Hülya, Ü. N. L. Ü (2013). Testing of BIST And TurkDEX: Random Walk and Market Efficiency. International Journal of Economics and Finance Studies, 5(2), 10-22.
  • Dickinson, J. P., & Muragu, K. (1994). Market efficiency in developing countries: A case study of the Nairobi Stock Exchange. Journal of Business Finance & Accounting, 21(1), 133-150.
  • Dimson, E., & Mussavian, M. (1998). A brief history of market efficiency. European financial management, 4(1), 91-103.
  • Dufour, J. M., Lepage, Y., & Zeidan, H. (1982). Nonparametric testing for time series: a bibliography. Canadian Journal of Statistics, 10(1), 1-38.
  • Eviews.com. (2019). User’s Guide : Basic Data Analysis : Series : Correlogram. Retrived December 24, 2019 from http://www.eviews.com/help/helpintro.html#page/content/series-Correlogram.html
  • Fama, E. F. (1965). The behavior of stock-market prices. The journal of Business, 38(1), 34-105.
  • Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The journal of Finance, 25(2), 383-417.
  • Gozbasi, O., Kucukkaplan, I., & Nazlioglu, S. (2014). Re-examining the Turkish stock market efficiency: Evidence from nonlinear unit root tests. Economic Modelling, 38, 381-384.
  • Gujarati, D. N. (2009). Basic econometrics. Tata McGraw-Hill Education.
  • Harvey, A. C. (2005). A unified approach to testing for stationarity and unit roots. Identification and Inference for Econometric Models, 403-25.
  • Investment Support and Promotion Agency of Turkey (2015). The Financial Services Sector in Turkey. Retrieved from https://www.flandersinvestmentandtrade.com/export/sites/trade/files/market_studies/The%20Financial%20Services%20Sector%20in%20Turkey.pdf
  • Kapusuzoglu, A. (2013). Testing weak form market efficiency on the Istanbul stock exchange (ISE). International Journal of Business Management and Economic Research, 4(2), 700-705.
  • Kendall, M. G., & Hill, A. B. (1953). The analysis of economic time-series-part i: Prices. Journal of the Royal Statistical Society. Series A (General), 116(1), 11-34.
  • Khandoker, M. S. H., Siddik, M. N. A., & Azam, M. (2011). Tests of weak-form market efficiency of Dhaka stock exchange: evidence from bank sector of Bangladesh. Interdisciplinary Journal of Research in Business, 1(9), 47-60.
  • Kiliç, Ö. G. D. S. B. (2005). Test of the weak form efficient market hypothesis for the Istanbul stock exchange by markov chains methodology. Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 14(1), 333-342.
  • Malkiel, B. G. (1989). Efficient market hypothesis. In Finance (pp. 127-134). Palgrave Macmillan, London.
  • Mobarek, A., & Keasey, K. (2000, May). Weak-form market efficiency of an emerging Market: Evidence from Dhaka Stock Market of Bangladesh. In ENBS Conference held on Oslo (pp. 1-30).
  • Muslumov, A., Aras, G., & Kurtulus, B. (2003). Evolving market efficiency in istanbul stock exchange. Istanbul Technical University Selected Articles, 271-291.
  • Nkoro, E., & Uko, A. K. (2016). Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation. Journal of Statistical and Econometric Methods, 5(4), 63-91.
  • Palachy, S. (2019). Towards Data Science. Detecting stationarity in time series data. Retrive on Dcember 2, 2019 from https://towardsdatascience.com/detecting-stationarity-in-time-series-data-d29e0a21e638
  • Panas, E. E. (1990). The behaviour of Athens stock prices. Applied Economics, 22(12), 1715-1727.
  • PDP (2019). Indexes. Retrieved on December 17, 2019 from. https://www.kap.org.tr/en/Endeksler
  • Pilbeam, K. (2018). Finance & financial markets. Macmillan International Higher Education.
  • Roberts, H. V. (1959). Stock-market" patterns" and financial analysis: methodological suggestions. The Journal of Finance, 14(1), 1-10.
  • Samuelson, P. A. (1965), Proof that properly anticipated prices fluctuate randomly, Industrial Management Review 6(2), 41–49.
  • Saymeh, A. A. F. (2013). Empirical Testing for Weak Form Hypothesis of Emerging Capital Markets: A Comparative study of Jordan’s ASE and Turkey’s BORSA IST. International Journal of Empirical Finance, 1(2), 20-26.
  • Sjö, B. (2008). Testing for unit roots and cointegration. Lectures in Modern Econometric Time series Analysis.
  • Stengos, T., & Panas, E. (1992). Testing the efficiency of the Athens Stock Exchange: Some results from the banking sector. Empirical Economics, 17(2), 239-252.
  • Stephanie (2016). Statistics How To. Serial Correlation / Autocorrelation: Definition, Tests. Retrieved December 21, 2019, from https://www.statisticshowto.datasciencecentral.com/serial-correlation-autocorrelation/
  • Stephanie (2018). Statistics How To. Ljung Box Test: Definition. Retrieved December 21, 2019, from https://www.statisticshowto.datasciencecentral.com/ljung-box-test/
  • Syczewska, E. M. (2010). Empirical power of the Kwiatkowski-Phillips-Schmidt-Shin test (No. 45).
  • Tas, O., Atac, C.G., (2019). Testing random walk hypothesis for Istanbul stock exchange. PressAcademia Procedia (PAP), V.9, p.48-53
  • Tintner, G. (1965). Introduction to Econometrics. Vvedenie v ekonometriku, 361.
  • Virmani, V. (2004). Unit Root Tests: Results from some recent tests applied to select Indian macroeconomic variables.
  • Wang, Y. (2003). Nonparametric tests for randomness. ECE, 461, 1-11.
  • Yücel, Ö. (2016). Finansal piyasa etkinliği: Borsa İstanbul üzerine bir uygulama. International Review of Economics and Management, 4(3)
There are 56 citations in total.

Details

Primary Language English
Subjects Finance, Business Administration
Journal Section Articles
Authors

Suadiq Mehammed Hailu This is me 0000-0003-3270-1357

Gamze Vural This is me 0000-0002-1385-7551

Publication Date September 30, 2020
Published in Issue Year 2020

Cite

APA Hailu, S. M., & Vural, G. (2020). TESTING THE WEAK FORM MARKET EFFICIENCY OF BORSA ISTANBUL: AN EMPIRICAL EVIDENCE FROM TURKISH BANKING SECTOR STOCKS. Journal of Economics Finance and Accounting, 7(3), 236-249. https://doi.org/10.17261/Pressacademia.2020.1291

Journal of Economics, Finance and Accounting (JEFA) is a scientific, academic, double blind peer-reviewed, quarterly and open-access online journal. The journal publishes four issues a year. The issuing months are March, June, September and December. The publication languages of the Journal are English and Turkish. JEFA aims to provide a research source for all practitioners, policy makers, professionals and researchers working in the area of economics, finance, accounting and auditing. The editor in chief of JEFA invites all manuscripts that cover theoretical and/or applied researches on topics related to the interest areas of the Journal. JEFA publishes academic research studies only. JEFA charges no submission or publication fee.

Ethics Policy - JEFA applies the standards of Committee on Publication Ethics (COPE). JEFA is committed to the academic community ensuring ethics and quality of manuscripts in publications. Plagiarism is strictly forbidden and the manuscripts found to be plagiarized will not be accepted or if published will be removed from the publication. Authors must certify that their manuscripts are their original work. Plagiarism, duplicate, data fabrication and redundant publications are forbidden. The manuscripts are subject to plagiarism check by iThenticate or similar. All manuscript submissions must provide a similarity report (up to 15% excluding quotes, bibliography, abstract and method).

Open Access - All research articles published in PressAcademia Journals are fully open access; immediately freely available to read, download and share. Articles are published under the terms of a Creative Commons license which permits use, distribution and reproduction in any medium, provided the original work is properly cited. Open access is a property of individual works, not necessarily journals or publishers. Community standards, rather than copyright law, will continue to provide the mechanism for enforcement of proper attribution and responsible use of the published work, as they do now.