ANALYSIS OF CHANGES IN İSTANBUL CITY INDEX VALUES WITH HIDDEN MARKOV MODEL

Year 2019, Volume: 41 Issue: 2, 319 - 337, 06.01.2020

Öyküm Esra Aşkın

https://doi.org/10.14780/muiibd.665045

Cited By: 1

Abstract

City indexes are not only a significant indicator of regional development but also a very useful guide
for decision makers interested in investment to a specific region. Different city indexes have been
calculated by İstanbul Stock Exchange (ISE) in order to reflect the financial performances of cities.
The main purpose of this study is to predict the future behaviors of İstanbul city index which has the
highest share of stocks being traded on ISE. To achieve this purpose, an important pattern recognition
technique that produces reliable estimates, Hidden Markov model (HMM), is suggested. The model
is constructed with four exogenous factors such as exchange rate, interest rate, money supply and
consumer price index and the validity of model is shown by one-, two – and three-months ahead
successful prediction results.

Keywords

City Indexes, İstanbul City Index, Hidden Markov Model, Future Predictions, Index Behavior

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