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Test Of Arbitrage Pricing Theory On Stock Indices: An Empirical Study On Bist100

Author

Listed:
  • AKEL Veli

    (Erciyes University)

  • CISSE Boubacar Amadou

    (University of Management and Social Sciences of Bamako)

Abstract

The Arbitrage Pricing Theory (APT), based on arbitrage theory, emphasizes that a market can rebalance itself After the occurrence of an arbitrage opportunity. This capability of financial markets confirms the Arbitrage Pricing Theory. This study tests the validity of APT on the Istanbul Stock Exchange between the period of January 2009 and March 2020 on BIST100. Purposing to determine the relationship between security returns and other macroeconomic factor, it will serve as a compass for other emerging countries. With stock return factor as independent variable, this study uses a Vector Error Correction Model (from the VAR family model) with five macro-economic factors: GDP, interest rate, inflation rate, exchange rate and the countries' production indexes. The resulting model depicts a negative Error Correction Term (ECT) which indicates the validity of the model in the Turkish stock exchange.

Suggested Citation

  • AKEL Veli & CISSE Boubacar Amadou, 2023. "Test Of Arbitrage Pricing Theory On Stock Indices: An Empirical Study On Bist100," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 75(1), pages 7-18, April.
    • Handle: RePEc:blg:reveco:v:75:y:2023:i:1:p:7-18
    DOI: 10.56043/reveco-2023-0001
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Arbitrage Pricing Theory; Capital Asset Pricing Model; Error Correction Model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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