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Is the Istanbul Stock Exchange Weak Form Efficient? A Markov-Switching ADF Test Approach

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  • Emrah Ismail CEVIK

Abstract

The integration order of stock prices is related to the efficient market hypothesis and the hypothesis suggest that the stock market can be named as efficient when stock prices exhibit random walk properties. In this study, we examine regime-dependent integration order of Istanbul Stock Exchange 100 index by means of Markov-Switching ADF (MS-ADF) test. MS-ADF test result indicates that the validity of weak form efficient market hypothesis is regime-dependent. These findings suggest that while weak form efficiency is provided in high volatile regime, the market is not weak form efficient in the low volatility regime.

Suggested Citation

  • Emrah Ismail CEVIK, 2018. "Is the Istanbul Stock Exchange Weak Form Efficient? A Markov-Switching ADF Test Approach," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 12(2), pages 9-30.
    • Handle: RePEc:bdd:journl:v:12:y:2018:i:2:p:9-30
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    More about this item

    Keywords

    Efficient Market Hypothesis; Istanbul Stock Exchange; Markov-Switching Model;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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