Revisiting the efficient market hypothesis for ten sub-sectors of the Istanbul Stock Exchange (BIST): new evidence from non-linear unit root tests with Fourier function

Purpose The purpose of this paper is to examine the efficient market hypothesis (EMH) for ten sub-sector indices in BIST (Istanbul Stock Exchange) including Services Index (XUHIZ), Food Index (XGIDA), Holding Index (XHOLD), Chemicals Index (XKMYA), Metals Index (XMANA), Technology Index (XUTEK), Banks Index (XBANK), Financials Index (XUMAL), Industrial Index (XUSIN). Design/methodology/approach To analyse the EMH for ten subsector indices in BIST, the ADF, Fourier KPSS (FKPSS) (2006), Fourier ADF (FADF) (2010), KSS (2003), Fourier KSS (FKSS) (2010), Sollis (2009), Omay (2015), Fourier Sollis (FSOLLIS) (2018), Kruse (2011), Fourier Kruse (FKRUSE) (2019) unit root tests are applied. Findings The results of the Fourier KPSS (2006) stationarity test confirm that the EMH is not valid for the variables XMANA, XUTEK, XBANK and XUMAL. Furthermore, the results of the KSS (2003), Sollis (2009), Fourier Sollis (2018), Kruse (2009) and Fourier Kruse (2019) unit root tests also revealed that the EMH is not valid for the variable XMANA. Finally, the results of the Fourier-Sollis (2018) and Fourier-Kruse (2019) unit root tests imply that the EMH is not valid for the variables XKMYA and XBANK. Originality/value This study is a comparison of the results of traditional unit root tests without structural breaks and linear with the results of current unit root tests with structural breaks and non-linear.