Under the Behavioral Finance Assumption, Analyzing the anomaly of the overreaction for the Indexes and Shares at Borsa Istanbul

Abstract

The aim of this study is to investigate the existence of overreaction hypothesis for Borsa İstanbul in line with the behavioral finance and market efficiency hypothesis. In this context, after examining the market efficiency hypothesis and the theoretical background of anomalies, literature review is included. The existence of an overreaction anomaly was then tested for both the share certificates and BIST 100, BIST 50, BIST 30 and BIST industrial indexes. In the testing phase, the method of DeBondt and Thaler (1985) is taken as reference. DeBondt and Thaler (1985) method was modified during the analysis. According to the results of the tests carried out with the monthly returns of the stocks which have been continuously traded for the period 2004-2018, The findings support the Overreaction Hypothesis and provide evidence for the profitability of contrarian strategies. In other words, it is concluded that the market efficiency hypothesis is not valid for Istanbul.