An investigation of the efficiency of borsa İstanbul after July 15 coup attempt

The purpose of this study is to analyze the effect of July 15 coup attempt that occurred in Turkey on Borsa Istanbul (Istanbul Stock Exchange, BIST). As it is known, there has been a military coup attempt by a group that involved in Turkish military forces on July 15, 2016 on Friday. This attempt was suppressed in the same weekend by the objection of Turkish society. In the ensuing period, some major events has happened in Turkey. Turkish Economy was also affected by the coup attempt. Moreover, as a result of fluctuations in the economy and the investment sector, Fitch and Moody's lowered the credit rating of Turkey. The coup attempt resulted a negative effect on BIST as well. In the first opening day after July 15, there has been a dramatic decline on share prices in BIST. In this study, the effect of July 15 coup attempt on BIST is analyzed empirically. In this direction, whether there is a structural break on BIST on July 15 is examined. In addition to this, the validity of Fama's efficient market hypothesis before and after July 15 is investigated. For this aim, potential structural breaks on BIST 100 Index for the period between February 1986 and November 2018 are determined with unit root tests allowing structural breaks tests and it is tested whether there is a break on July 15, 2016. Furthermore, the validity of the efficient market hypothesis, is tested by Augmented Dickey Fuller test in the absence of structural breaks, and by Perron (1989), Zivot and Andrews (1992), Perron (1997), Lumsdaine and Papell (1997), Lee and Strazicich (2003) unit root tests in the presence of structural breaks. Thus, the validity of the efficient market hypothesis and a possible change on this efficiency on July 15 is revealed. Results suggest that BIST 100 Index is not weak-efficient in the period examined. According to the results of the structural break unit root tests, no significant break exist in the BIST 100 index on July 15, 2016. Therefore, it is determined that the July 15 coup attempt has no effect on the effective market hypothesis for BIST 100 Index. Keywords: Borsa Istanbul, efficient market hypothesis, July 15 coup attempt, structural break.