Effective market hypothesis and technical analysis: An application on shares in BIST participation 30 index

The concept of efficiency in financial markets and theories of rational investor behavior has been a topic of discussion since the 18th century. This process, which began with the acquisition of wealth by individuals, has led to theories put forward by scientists in various periods. At the beginning of these theories is the Expected Utility Theory put forward by Bernoulli in 1738. This theory has assumed over a long period of time that people will choose the option that will benefit them the most when investing or choosing one of the alternatives in the face of a risk. Therefore, it has been accepted that individuals will act rationally in the face of risk and act rationally continuously. This theory has been both developed and criticized by many scientists over time. One of the steps towards the development of the theory is the Active Market Hypothesis, which was put forward by Eugene Fama in 1970. In this study, Fama stated that the situation affecting the decision-making behavior of investors in financial markets depends on the information disclosed to the public. However, it assumes that investors who obtain such information in an equal and cost-free manner make decisions in a rational manner by evaluating them in a mere manner. It was also argued that it was not possible to make probability predictions about the future by re-evaluating the previously disclosed information. For this reason, it has been stated that investors cannot obtain extranormal returns from the market and that the markets are effective. In the face of these sharp assumptions of the efficient market model, Kahneman and Tversky presented an opposing financial understanding and theory in 1979 in their study Theory of Expectation: Analysis of Decision Making at Risk. In this study, it was revealed that excitement, joy, sadness, or a past disappointment can affect the decision of individuals when making a decision against a risk. It is assumed that individuals are living beings and therefore it is inevitable that they will be affected by mental effects, emotional and environmental situations. Moreover, it has been revealed that investors repeat this situation systematically, not once. Therefore, the possibility that these movements that people have made in the past can be made in the future has revealed a situation of predicting and analyzing a probability in financial markets. At this point, the analysis method used for stock investments, which is one of the most important tools of the financial markets, is technical analysis. In this study, it was tried to measure the effectiveness and efficiency of this analysis method by testing it on the shares in the BIST 30 Participation Index. In our study, RSI-MACD and EMA indicators of technical analysis were used. The main reason for choosing these indicators is that they are the most used technical analysis indicators. As a result, the findings obtained were used in the indicators of technical analysis and it was determined that significant profits could be obtained if the trading decision was made as a result of the signals produced by these indicators. At the same time, it is believed that it is an advantageous way to invest based on technical analysis in the short term.