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Analysis on Runs of Daily Returns in Istanbul Stock Exchange

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  • Şensoy, Ahmet

Abstract

The aim of this paper is to obtain some statistical properties about runs of daily returns of ISE30, ISE50 and ISE100 indices and compare these results with the empirical stylized facts of developed stock markets. In this manner, all time historical daily closing values of these indices are studied and the following observations are obtained; exponential law fits pretty well for the distribution of both run length and magnitude of run returns. Market is equally likely to go up or go down everyday. Market depth has improved over recent years. Large magnitudes of run returns are more likely to be seen in positive runs. As in the developed stock markets, daily returns in Istanbul Stock Exchange don’t have significant autocorrelations but absolute values (i.e. magnitudes) of daily returns exhibit strong and slowly decaying autocorrelations up to several weeks suggesting volatility clustering. Similar to the absolute daily returns, absolute value of run returns display strong and slowly decaying autocorrelations which again supporting the existence of volatility clustering. Unlike magnitudes of run returns, lenghts of runs don’t have significant autocorrelations.

Suggested Citation

  • Şensoy, Ahmet, 2012. "Analysis on Runs of Daily Returns in Istanbul Stock Exchange," MPRA Paper 42645, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42645
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    File URL: https://mpra.ub.uni-muenchen.de/42645/1/MPRA_paper_42645.pdf
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    References listed on IDEAS

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    1. Pagan, Adrian, 1996. "The econometrics of financial markets," Journal of Empirical Finance, Elsevier, vol. 3(1), pages 15-102, May.
    2. R. Cont, 2001. "Empirical properties of asset returns: stylized facts and statistical issues," Quantitative Finance, Taylor & Francis Journals, vol. 1(2), pages 223-236.
    3. Comte, F. & Renault, E., 1996. "Long memory continuous time models," Journal of Econometrics, Elsevier, vol. 73(1), pages 101-149, July.
    4. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters,in: THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78 World Scientific Publishing Co. Pte. Ltd..
    5. Easley, David & Kiefer, Nicholas M & O'Hara, Maureen, 1997. "One Day in the Life of a Very Common Stock," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 805-835.
    6. R. F. Engle & A. J. Patton, 2001. "What good is a volatility model?," Quantitative Finance, Taylor & Francis Journals, vol. 1(2), pages 237-245.
    7. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
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    More about this item

    Keywords

    Stylized Facts; Return Runs; Autocorrelation; Volatility Clustering; Stock Market Efficiency;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C00 - Mathematical and Quantitative Methods - - General - - - General

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