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Efficient market hypothesis: evidence from a small open-economy

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  • Zeynel Abidin Ozdemir

Abstract

This article studies the efficient market hypothesis for the Istanbul Stock Exchange National 100 (ISEN 100) price index within the Lumsdaine and Papell two structural breaks unit root test framework. The main finding of the article shows that the ISEN 100 index is characterized by a unit root with two structural breaks, which is consistent with the efficient market hypothesis. In addition, the article applies the augmented Dickey-Fuller test, runs test and the variance-ratio test to test the weak-form efficiency of the ISEN 100. The analyses are repeated for three sub-periods delineated in view of the endogenously determined break points.

Suggested Citation

  • Zeynel Abidin Ozdemir, 2008. "Efficient market hypothesis: evidence from a small open-economy," Applied Economics, Taylor & Francis Journals, vol. 40(5), pages 633-641.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:5:p:633-641
    DOI: 10.1080/00036840600722315
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    References listed on IDEAS

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    1. George Kapetanios, 1999. "A Test of M Structural Breaks Under the Unit Root Hypothesis," National Institute of Economic and Social Research (NIESR) Discussion Papers 152, National Institute of Economic and Social Research.
    2. Ercan Balaban & Kursat Kunter, 1996. "Stock Market Efficiency in a Developing Economy : Evidence from Turkey," Discussion Papers 9612, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    3. Ercan Balaban, 1995. "Informational Efficiency of the Istanbul Securities Exchange and Some Rationale for Public Regulation," Discussion Papers 9502, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
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    Cited by:

    1. Müge Özdemir, 2022. "Analyzing the Efficient Market Hypothesis with the Structural Break and Nonlinear Unit Root Tests: An Application on Borsa Istanbul," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 0(37), pages 257-282, December.
    2. Kumar Narayan, Paresh & Narayan, Seema & Popp, Stephan, 2010. "Energy consumption at the state level: The unit root null hypothesis from Australia," Applied Energy, Elsevier, vol. 87(6), pages 1953-1962, June.
    3. Guglielmo Maria Caporale & Luis A. Gil‐Alana & James C. Orlando, 2016. "Linkages Between the US and European Stock Markets: A Fractional Cointegration Approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(2), pages 143-153, April.
    4. Evans, Olaniyi, 2018. "Improved Financial Performance Without Improved Operational Efficiency: The Case of Nigerian Firms," MPRA Paper 118202, University Library of Munich, Germany.
    5. Tiwari, Aviral Kumar & Kyophilavong, Phouphet, 2014. "New evidence from the random walk hypothesis for BRICS stock indices: a wavelet unit root test approach," Economic Modelling, Elsevier, vol. 43(C), pages 38-41.
    6. Ozdemir, Zeynel Abidin, 2009. "Linkages between international stock markets: A multivariate long-memory approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(12), pages 2461-2468.
    7. Ali, Sajid & Shahzad, Syed Jawad Hussain & Raza, Naveed & Al-Yahyaee, Khamis Hamed, 2018. "Stock market efficiency: A comparative analysis of Islamic and conventional stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 139-153.
    8. Mehmet Balcilar & Zeynel Abidin Ozdemir & Esin Cakan, 2015. "Structural Breaks, Long Memory, or Unit Roots in Stock Prices: Evidence from Emerging Markets," International Econometric Review (IER), Econometric Research Association, vol. 7(1), pages 13-33, April.
    9. Balcilar, Mehmet & Ozdemir, Zeynel Abidin, 2013. "The causal nexus between oil prices and equity market in the U.S.: A regime switching model," Energy Economics, Elsevier, vol. 39(C), pages 271-282.
    10. Mehmet Altuntaş & Emre Kılıç & Şevket Pazarcı & Alican Umut, 2022. "Borsa İstanbul Alt Endekslerinde Etkin Piyasa Hipotezinin Test Edilmesi: Fourier Kırılmalı ve Doğrusal Olmayan Birim Kök Testlerinden Kanıtlar," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 7(1), pages 169-185.
    11. Gozbasi, Onur & Kucukkaplan, Ilhan & Nazlioglu, Saban, 2014. "Re-examining the Turkish stock market efficiency: Evidence from nonlinear unit root tests," Economic Modelling, Elsevier, vol. 38(C), pages 381-384.
    12. Deniz Erer & Elif Erer & Selim Güngör, 2023. "The aggregate and sectoral time-varying market efficiency during crisis periods in Turkey: a comparative analysis with COVID-19 outbreak and the global financial crisis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-25, December.
    13. Khaled, Mohammed S & Keef, Stephen P, 2011. "Tests for weak form market efficiency in stock prices: Monte Carlo evidence," Working Paper Series 1993, Victoria University of Wellington, School of Economics and Finance.
    14. Shahzad, Syed Jawad Hussain & Nor, Safwan Mohd & Mensi, Walid & Kumar, Ronald Ravinesh, 2017. "Examining the efficiency and interdependence of US credit and stock markets through MF-DFA and MF-DXA approaches," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 351-363.
    15. Erdas Mehmet Levent, 2019. "Validity of Weak-Form Market Efficiency in Central and Eastern European Countries (CEECs): Evidence from Linear and Nonlinear Unit Root Tests," Review of Economic Perspectives, Sciendo, vol. 19(4), pages 399-428, December.
    16. Hasan A?an Karaduman, 2016. "Stylized Facts And Weak-Form Efficiency In Turkish Stock Market," Proceedings of International Academic Conferences 4006651, International Institute of Social and Economic Sciences.
    17. Mohammad Joarder & Monir Ahmed & Tahsina Haque & Syed Hasanuzzaman, 2014. "An empirical testing of informational efficiency in Bangladesh capital market," Economic Change and Restructuring, Springer, vol. 47(1), pages 63-87, February.
    18. Choi, Sun-Yong, 2021. "Analysis of stock market efficiency during crisis periods in the US stock market: Differences between the global financial crisis and COVID-19 pandemic," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    19. repec:mth:ijafr8:v:9:y:2019:i:1:p:400-413 is not listed on IDEAS
    20. Ozdemir, Zeynel Abidin & Gokmenoglu, Korhan & Ekinci, Cagdas, 2013. "Persistence in crude oil spot and futures prices," Energy, Elsevier, vol. 59(C), pages 29-37.
    21. Kian-Ping Lim & Weiwei Luo & Jae H. Kim, 2013. "Are US stock index returns predictable? Evidence from automatic autocorrelation-based tests," Applied Economics, Taylor & Francis Journals, vol. 45(8), pages 953-962, March.
    22. Khaled, Mohammed S & Keef, Stephen P, 2011. "Tests for weak form market efficiency in stock prices: Monte Carlo evidence," Working Paper Series 18606, Victoria University of Wellington, School of Economics and Finance.

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