ISSN 2736-1721
Global Journal of Business Management ISSN 6731-4538 Vol. 6 (1), pp. 001-009, January, 2012. © International Scholars Journals
Full Length Research Paper
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.
Accepted 09 November, 2011
Abstract
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.