ISE REVIEW 

A General Outlook of the Turkish Industry and
Competitiveness of the Private Sector
B. Safa Ocak

Abstract
The following article constitutes a speech delivered at the DEIK Conference in London on September 18, 1996. First, it draws a comparison between the 1980s, the decade of economic and financial liberalization and current economic conditions in Turkey. The effects of the Customs Union on Turkish industry since January 1996 have also been analysed. Finally, banking, textile, ceramics, cement, food and iron and steel sectors are analysed in terms of competitiveness within the context of harmonisation of domestic industries with the European Union member countries.

Intercultural Bank Management in Israel
Yair E. Orgler

Abstract
With a population of 5.5 million and 15,000 US$ per capita income in 1994, Israel is a headrunner among developing countries. Banking activities are led by the five largest banks representing 93% of total activities. Public sector still plays a dominant role in the banking sector, since after the 1983 banking share crisis, the government took control in the sector. This article studies Israel’s banking sector, providing a historical, cultural and economic background. Within this context, corporate structure of the banking system and its public image as well as effects of future regional and regulatory developments with a special interest on privatization of the largest three banks constitute the topic of this article.

Can Noise Traders Survive? Evidence from Closed-End Funds
Richard W. Sias, Laura T. Starks, Seha M. Tiniç

Abstract
This study presents the results of the first direct empirical tests of the De Long, Schleifer, Summers, and Waldmann noise trader model. The two key propositions of the model are that: (1) noise trader risk is systematic and (2) it is priced in the market. The results presented in this paper do not provide support for either of these propositions. The risk associated with fluctuations in closed-end fund discounts or premiums is, to a large extent, diversifiable and investors who hold closed-end funds do not earn an additional risk premium for shouldering the so-called “noise trader risk.” Furthermore, our results suggest that noise traders are driven from the market by rational investors who trade against them. We also do not find a significant relation between proxies for individual investor sentiment and closed-end fund discounts.

P/E Ratio and the Dividend Yield as Forecasting Tools in the Istanbul Stock Exchange
Kürsat Aydogan & Alparslan Güney

Abstract
We investigate the ability of average price-earnings (P/E) ratio and dividend yield as predictors of future returns at the Istanbul Stock Exchange during the 10-year period between 1986-1995. We examine the returns on the ISE Composite Index followed by periods of P/E ratio and dividend yield quintiles ranging from low to high. We find that 3-month, 6-month and 12-month returns following periods of low P/E ratios and high dividend yields are significantly higher than those after periods of high P/E ratio and low dividend yields. In terms of real returns, low P/E ratio and high dividend yields are followed by positive returns over all horizons, whereas real returns are negative subsequent to periods with high P/E ratio and low dividend yield. A market timing strategy based on switching between bonds and stocks according to the level of P/E ratios and dividend yield is tested. We find that the performances of those portfolios are superior to controlled portfolios that are divided between bonds and stocks.

Integration Versus Segmentation: The Istanbul Stock Exchange
Süleyman Gökçen &Ahu Öztürkmen

Abstract
The purpose of this paper is to analyse the integration versus segmentation issue for the Istanbul Stock Exchange vis-a-vis global developed markets. Two different classes of information variables are used. These are global and local variables. Global variables are the return of the world market portfolio, dividend yield of S&P 500 stock index, U.S. term structure premia and U.S. default risk yield spread. Local variables are the returns, price earning ratios and dividend yields of the Istanbul Stock Exchange portfolio. The sample for all the information variables includes the period from January 1989 to December 1993. Our results suggest that it is possible to estimate future behaviour of Istanbul Stock Exchange returns by using local information variables. We also found out that the Istanbul Stock Exchange is completely segmented with developed countries’ stock markets during the time period mentioned above.

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