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Full Length Research Paper
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Chaotic processes of common
stock index returns: An empirical examination on Istanbul
Stock Exchange (ISE) market
Gökhan Özer* and Cengiz Ertokatli
Department of
Business Administration, Gebze Institute of Technology,
Gebze, Kocaeli, Turkey.
*Corresponding author. E-mail:
ozer@gyte.edu.tr. Tel:
+90 (262) 6051412.
Fax: +90 (262)
6538490.
Accepted 29 April, 2010 |
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Abstract |
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The nonlinearity and accompanying concept, namely the chaos
receive great attention from researchers. This study employs
nonlinearity and chaos theories to examine the behavior of the
Istanbul Stock Exchange (ISE) all share equity indices. The main
purpose was to explore the existence or nonexistence of
nonlinearity and chaotic behavior in the ISE market. Therefore,
the efficient markets’ characteristics, which are the random
behavior of asset prices and nonlinear chaotic dynamics, were
contrasted and the probabilistic and deterministic behaviors of
the asset prices were compared. Our results based on BDS, Hinich
Bispectral, Lyapunov Exponent and NEGM tests reject the
efficient market hypothesis that the index series examined in
this study is not random, independent and identically
distributed (i.i.d).
Key words:
Efficient market hypothesis, nonlinearity, chaotic dynamics. |
