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## FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES

#### Ersin KİRAL [1] , Berna UZUN [2]

Purpose- The estimation regarding to the exact daily price of the stock market index has always been a difficult task in the business sector. Therefore, there are numerous research studies carried out to predict the direction of stock price index movement.

Methodology- Classical Markov chain model (MC) is commonly used for this prediction and it gives valuable signals about the movements of the closing returns of the stock market index. In this paper, we propose Markov Chain Model with Fuzzy States (MCFS) to predict the closing returns of Borsa Istanbul (BIST 100) index using triangular fuzzy numbers. We apply this method to hold the information while system moves between the extreme values of the states.

Findings- With this study, we show that the use of MCFS for the selected period provides a higher forecasting accuracy to the investors compared to MC model.

Conclusion-  Markov chains of the fuzzy states defines a stochastic system more precisely than the classical Markov chains and it gives more sensitive future prediction opportunities. It can be used for estimating returns of individual common stocks and also for the other investment instruments.

Stock return, fuzzy sets, conditional probability, Markov Decision Process, Markov Chain with fuzzy states
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Subjects Social Articles Author: Ersin KİRAL Author: Berna UZUN Publication Date : March 30, 2017
 Bibtex @research article { jefa357395, journal = {Journal of Economics Finance and Accounting}, issn = {}, eissn = {2148-6697}, address = {}, publisher = {PressAcademia}, year = {2017}, volume = {4}, pages = {15 - 24}, doi = {10.17261/Pressacademia.2017.362}, title = {FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES}, key = {cite}, author = {Ki̇ral, Ersin and Uzun, Berna} } APA Ki̇ral, E , Uzun, B . (2017). FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES . Journal of Economics Finance and Accounting , 4 (1) , 15-24 . DOI: 10.17261/Pressacademia.2017.362 MLA Ki̇ral, E , Uzun, B . "FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES" . Journal of Economics Finance and Accounting 4 (2017 ): 15-24 Chicago Ki̇ral, E , Uzun, B . "FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES". Journal of Economics Finance and Accounting 4 (2017 ): 15-24 RIS TY - JOUR T1 - FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES AU - Ersin Ki̇ral , Berna Uzun Y1 - 2017 PY - 2017 N1 - doi: 10.17261/Pressacademia.2017.362 DO - 10.17261/Pressacademia.2017.362 T2 - Journal of Economics Finance and Accounting JF - Journal JO - JOR SP - 15 EP - 24 VL - 4 IS - 1 SN - -2148-6697 M3 - doi: 10.17261/Pressacademia.2017.362 UR - https://doi.org/10.17261/Pressacademia.2017.362 Y2 - 2020 ER - EndNote %0 Journal of Economics Finance and Accounting FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES %A Ersin Ki̇ral , Berna Uzun %T FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES %D 2017 %J Journal of Economics Finance and Accounting %P -2148-6697 %V 4 %N 1 %R doi: 10.17261/Pressacademia.2017.362 %U 10.17261/Pressacademia.2017.362 ISNAD Ki̇ral, Ersin , Uzun, Berna . "FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES". Journal of Economics Finance and Accounting 4 / 1 (March 2017): 15-24 . https://doi.org/10.17261/Pressacademia.2017.362 AMA Ki̇ral E , Uzun B . FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES. JEFA. 2017; 4(1): 15-24. Vancouver Ki̇ral E , Uzun B . FORECASTING CLOSING RETURNS OF BORSA ISTANBUL INDEX WITH MARKOV CHAIN PROCESS OF THE FUZZY STATES. Journal of Economics Finance and Accounting. 2017; 4(1): 15-24.

Authors of the Article
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