TESTING RANDOM WALK HYPOTHESIS FOR ISTANBUL STOCK EXCHANGE

Year 2019, Volume: 9 Issue: 1, 48 - 53, 30.07.2019

Oktay Tas Cigdem Guleroglu Atac

https://doi.org/10.17261/Pressacademia.2019.1063

Abstract

Purpose- This
study investigates weak form market efficiency of Istanbul Stock Exchange (ISE)
via Random Walk Hypothesis (RWH).

Methodology-  Two random walk tests, Dickey-Fuller and Runs test are
used to search for random walk in stock market. Natural log returns of BIST-30
index firms, BIST-30 index, participation index firms and participation index
are analysed by both tests over a five year period from 2013 to 2018.
Therefore, BIST30 index returns together with BIST100 and BISTTUM indexes are
analysed in a longer period from 2000 to 2018 including 2001 and 2008 financial
crises in Turkey.

Findings- Weak
form market efficiency is justified according to Dickey Fuller test, but not
for Runs test.

Conclusion- While
Dickey Fuller test results reject random walk in ISE, which leads that weak
form market efficiency is not justified; Runs test are failed to give certain
results on market efficiency for the same data set and time period.

Keywords

Market efficiency in weak form, Dickey Fuller random walk test, runs test, Istanbul Stock Exchange Indexes, efficient market hypothesis

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