Testing the Efficient Market Hypothesis in Borsa Istanbul Sub-Indices: Evidence from Unit Root Tests with Fourier Breaks and Non-Linearity

The aim of this study is to test the validity of the efficient market hypothesis for six indexes (XU100, XTUMY, XUHIZ, XUMAL, XUSIN, XUTEK) in BIST. For this, ADF, RALS-ADF, Fourier-ADF and Fourier-KSS unit root tests were used. The longest period was used for each index in terms of data availability as the analysis period. Unlike the literature, the validity of the efficient market hypothesis for six indices in the BIST has been comprehensively and comparatively examined by considering both structural breaks, non-normal distribution and non-linearity at the same time. According to the empirical findings, the null hypothesis could not be rejected in all unit root tests applied in the XUHIZ index. In other words, strong evidence has been obtained for the XUHIZ index in line with the effective market hypothesis. On the contrary, as a result of all unit root tests applied in the XUMAL index, the null hypothesis was rejected and the results indicating that the efficient market hypothesis was invalid were obtained. In other indices, it was observed that considering structural breaks and nonlinearity caused differences in the results. This situation highlights the importance of choosing the appropriate test for the data set.