A chaos analysis for Greek and Turkish equity markets

Purpose – This paper sets out to apply chaos theory to the prediction of stock returns using Greek and Turkish stock index data. The aim of the analysis is to empirically show whether the markets have informational efficiency, in a comparative perspective.Design/methodology/approach – The research employs Grassberger and Procaccia's methodology in the time series analysis in order to estimate the correlation and minimum embedding dimensions of the corresponding strange attractor. To achieve out of the sample multistep ahead prediction, the paper gives the average for overall neighbours' projections of k‐steps into the future.Findings – The results display the fact that the chaos theory is suitable to examine the time series of stock index returns. The empirical findings show that the stock markets are efficient in Greece, though in Turkey the market is predictable. The main practical implication of the findings is that the technical analysis works in Turkish markets and it is possible to beat the market, ...

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