Informational Efficiency of the Istanbul Securities Exchange and Some Rationale for Public Regulation

Abstract

The primary objective of this paper is to test informational efficiency of the İstanbul Securities Exchange (İSE) in terms of the Composite Index for the period January 1988-August 1994. A random walk test is performed for weakform efficiency. In addition, day of the week effects are investigated to test semi-strong form efficiency. Empirical results verify that the İSE Composite Index is neither weak-form nor semi-strong form efficient although the nature and degree of inefficiency differ across periods. The paper also discusses policy suggestions for public regulation of financial markets in developing countries. Key words/issues: Informational efficiency, strong form efficiency, semi-strong efficiency, weak form efficiency, day of the week effects, public regulation of

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