Multi-Scale Sample Entropy Analysis of the Turkish Stock Market Efficiency

Abstract

This study evaluates the market efficiency of the market index and five main sector indices in the Turkish stock market: BIST 100 (XU100), BIST Industrials (XUSIN), BIST Services (XUHIZ), BIST Transportation (XULAS), BIST Financials (XUMAL), and BIST Technology (XUTEK) for the pre-and post-COVID-19 pandemic, covering the period from January 2017 to July 2022. Market efficiency is calculated using a multiscale entropy-based method for the scales of 1 to 20 business days. Entropy can yield a relative degree of efficiency, by contrast with previous methods that dealt with the efficiency question in all-or-nothing form. On a daily scale, during the pre-COVID-19 pandemic period, the XUHIZ, XU100 and XULAS indices exhibit the highest efficiency. However, in the post-COVID-19 pandemic period, the XUMAL and XU100 indices demonstrate the highest efficiency. The findings suggest that the efficiency of all indices has declined due to the COVID-19 pandemic, with the XULAS index showing the most significant decrease in informational efficiency. A general tendency of reduced informational efficiency levels is found as the time scale increases in both periods. Therefore, the indices are partially efficient for certain time scales, indicating that they are not fully efficient.