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Title: Adaptive market hypothesis
Authors: Mandac, Pınar Evrim
Taşkın, Dilvin
Ergün, Zeliha Can
Keywords: Stock exchanges -- Turkey
Stocks -- Turkey
Investments -- Turkey
Stocks -- Prices -- Turkey
Corporate governance -- Turkey
Efficient market theory
Issue Date: 2019
Publisher: Eleftherios Thalassinos
Citation: Mandac, P. E., Taşkın, D., & Ergün, Z. C. (2019). Adaptive market hypothesis. International Journal of Economics and Business Administration, 7(4), 84-101.
Abstract: Purpose: To investigate the implications of the Addaptive Market Hypothesis (AMH) on Turkish stock exchange market (Borsa Istanbul) indices as an emerging economy. BIST-100, BIST-30 and BIST-All indices are subjected to the analyses for the period between January 2002 and April 2017. Design/Methodology/Approach: Two-year rolling windows and daily test values were calculated by using linear methods (Variance Ratio Test) and nonlinear methods (BDS test) to investigate the market efficiency. Findings: According to the Variance Ratio Test results, index returns are unpredictable, that is, the market is efficient, while the results of nonlinear analysis show the existence of adaptive market hypothesis. In particular, all three indices display efficiency in the 2013-2016 period implying that returns were not predictable in this period. The results of the non-linear analysis show that the market is efficient from time to time and sometimes deviates from efficiency, indicating the validity of the adaptive market hypothesis in Borsa Istanbul. Practical Implications: The changes in the market efficiency from time to time should be considered while taking important investment decisions. Moreover, according to AMH, since trends, panics, bubbles and crashes exist in the market, arbitrage opportunities arise time to time, and market timing is an important issue to catch the profit opportunities. Therefore, as a further study, matching the important events with the efficiency of the market could provide more insights about timing the market. Originality/Value: To the best of authors’ knowledge, this is the first comprehensive study that examines the index based AMH in Borsa Istanbul. This study is believed to contribute to the literature by giving insights about the evolution of market efficiency in Turkey.
ISSN: 22414754
Appears in Collections:IJEBA, Volume 7, Issue 4

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