Price dynamics in stock exchanges: The case of İstanbul stock exchange

In this study, the significance of prices formed in stock exchanges are investigated from the perspective of the logic of capitalist accumulation, and the dynamics of prices formed in the İstanbul Stock Exchange (İMKB) are modelled according to statistical mechanics. In order to investigate price dynamics, first conceptualisations about stock exchanges are discussed and the function of stock exchanges in capitalism, other than being solely a market, is treated theoretically. Ultimately, stock exchanges has become a catalyst for the accumulation, the accumulation by itself, a phenomenon that hinders accumulation and creates crisis dynamics at certain stages of capitalist accumulation. This multi-functional character has unfolded historically, and financial mechanisms in which stock exchanges exist played a dominant role. Another dimension of the theoretical investigation of stock exchanges is the treatment of price dynamics according to certain models. Models based on econophysics approach are considered as an alternative to the traditional models since models developed within modern finance theory are inadequate in the sense that disclosing price dynamics. In the study of the İMKB case, it is revealed that İMKB has a function in capital accumulation well beyond its volume and this is one of the important factors at the stages of articulation to capitalism. Most important finding obtained from the microscopic simulations in the statistical analyses of İstanbul Stock Exchange National 100 Index (XU100) is that the heterogeneity of investors and their interactions appear as the main variable to determine price dynamics. In 2001, a structural change is observed in the behavioural parameters of İMKB investors, interactions between investors increased while the importance of personal influences in decision making decreased. Another finding obtained from the microscopic modelling is the shortening of the investment horizons of investors and starting to react increasingly ever smaller price changes. As for the macroscopic analyses, it is seen that İstanbul Stock Exchange National 100 Index conforms to Cauchy distribution and prices fit a certain scaling pattern. When these two findings taken together, it is concluded that İstanbul Stock Exchange National 100 Index is much more risky than the predictions of the models based on normal distribution. The concepts of calculated risks and expected returns based on modern finance theory lose their meanings when the statistical characteristics of İstanbul Stock Exchange National 100 Index are considered.Keywords: Stock Exchanges, İstanbul Stock Exchange (İMKB), Pricing Models of Financial Assets, Financialization, Econophysics.