International Congress on Eurasian Economies

International Conference on Eurasian Economies

29-31 August 2016 – Kaposvár, HUNGARY

Paper detail

Paper ID : 1675
Status : Paper published
Language : English
Topic : Finance and Financial Crises
Presenter: Prof. Dr. Kutluk Kağan Sümer
Session : 4A Finance

Do Financial Markets Exhibit Chaotic Behavior? Evidence from BIST
Do Financial Markets Exhibit Chaotic Behavior? Evidence from BIST

Abstract

Knowing of the chaos theory by the economists has caused the understanding of the difficulties of the balance in economy. The applications of the chaos theory related to economy have aimed to overcome these difficulties. Chaotic deterministic models with sensitive dependence on initial conditions provide a powerful tool in understanding the apparently random movements in financial data. The dynamic systems are analyzed by using linear and/or nonlinear methods in the previous studies. Although the linear methods used for stable linear systems, generally fails at the nonlinear analysis, however, they give intuition about the problem. Due to a nonlinear variable in the difference equations describing the dynamic systems, unpredictable dynamics may occur. The chaos theory or nonlinear analysis methods are used to examine such dynamics systems. The chaos that expresses an irregular condition can be characterized by “sensitive dependence on initial conditions”. We employ four tests, viz. the BDS test on raw data, the BDS test on pre-filtered data, Correlation Dimension test and the Brock’s Residual test. The financial markets considered are the stock market, the foreign exchange market. The results from these tests provide very weak evidence for the presence of chaos in Turkish financial markets. BIST, Exchange Rate and Gold Prices. In this study, the methods for the chaotic analysis of the time series, obtained based on the discrete or continuous measurements of a variable are investigated. The chaotic analysis methods have been applied on the time series of various systems.

JEL codes: G17, C02

Sümer, Kutluk Kağan (2016). "Do Financial Markets Exhibit Chaotic Behavior? Evidence from BIST" in Proceedings of International Conference of Eurasian Economies 2016, pp.93-101, Kaposvár, HUNGARY.

DOI: https://doi.org/10.36880/C07.01675

Full paper in PDF format.

Session 4A: Finance

Eurasian Economists Association Istanbul Beykent University Kaposvár University Kyrgyz-Turkish Manas University Turkish-Hungarian Businessmen Association TIKA