The test of adaptive markets hypothesis in Borsa İstanbul

In financial markets, "Can future prices be predicted based on past price movements?" Many studies have been carried out to answer the question. As a result of the studies, two different concepts emerged as Efficient Markets Hypothesis (EMH) and Behavioral Finance (BF). According to EMH, investors are rational and the market is efficient. Against EMH, which argues that the prices in the market contain all available information, BF argued that investors are irrational and therefore financial markets cannot be efficient. Andrew Lo developed the Adaptive Markets Hypothesis (AMH) in 2004 to reconcile the Behavioral Finance and the Efficient Markets Hypothesis. According to AMH, investors are neither completely rational nor completely irrational. According to AMH, while the market can sometimes be efficient, sometimes it may not be effective. The efficiency of a market depends on the volume of competitors in the market, environmental conditions, profit opportunities and the adaptability of investors. It is aimed to examine market efficiency, and test the validity of the AMH. Accordingly, BIST 100, Financial, Industrial, Service, and Technology indexes were analyzed. First of all, the poor form effectiveness of BIST 100, Industrial, Financial, Service and Technology indexes for the 2000-2021 periods was examined. For this purpose, Portmanto Test and unit root tests were used. In the tests conducted for the validity of the Efficient Markets Hypothesis, it has been concluded that the Efficient Markets Hypothesis is not valid in the daily returns of the BIST 100, Industrial, Financial, Service and Technology indexes for the 2000-2021 period. Then, the Adaptive Markets Hypothesis was examined with linear and nonlinear methods during the 2000-2021 periods. For this purpose, daily return data is divided into two-year sub-periods. According to the linear tests, it was concluded that the Adaptive Markets Hypothesis in the indexes is invalid. According to the non-linear tests of the Adaptive Markets Hypothesis, it has been seen that the Adaptive Markets Hypothesis is not valid in the Technology index, but is valid in the BIST 100, Industrial, Financial and Service indexes. The validity of the hypothesis means that the market efficiency in the relevant indexes varies according to the market conditions. The fact that market activity changes over time can guide investors in developing investment strategies. Investors can obtain arbitrage and investment opportunities during periods when the market is not efficient