Evaluation of Market Efficiency and Trading Behavior of Investors: Evidence From Borsa Istanbul

Year 2018, Volume: 10 Issue: 18, 153 - 165, 01.01.2018

Yusuf Varlı

https://doi.org/10.14784/marufacd.460679

Abstract

After the financial crisis of 2007-08, debates on structures and characteristics of financial markets have
become the subject of much concern in both industry and academia. One of the most debated issues related
to financial markets is whether they are efficient or not. With an intent to enter into discussions, this paper
evaluates the market efficiency by using individual and institutional trade data from a specific stock exchange,
namely Borsa Istanbul. To do so, we first form several measures of market efficiency through daily
investor data covering five years. By using these measures, we show that there is a negative relationship between
market efficiency and turnover. That is, the more efficient the market, the lower the turnover. This result
contributes to the debate of irrationality of investor behavior. The data also suggests that the efficiency
in Borsa Istanbul has been increasing after the crisis, showing that the effect of the crisis has been vanishing
as time passes.

Keywords

Market Efficiency, Investor Behavior, Stock Trading, Turnover, Stock Exchange, Borsa Istanbul

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