ISE REVIEW

Basic Financial Characteristics in the Banking Sector: An Empirical Analysis (1990-1997)
Osman Karamustafa

Abstract
This paper aims at analyzing how financial characteristics of commercial banks operating in Turkish financial markets developed between 1990-1997. Financial characteristics are determined by transforming data obtained from balance sheet and income statements and collecting these ratios in certain groups through the use of multivariate statistical techniques. It is found that financial structure of banks is the most important variable determining financial characteristics, which have usually a stable structure in the period under consideration.

Leading Indicators Approach for Business Cycle Forecasting and a Study on Developing a Leading Economic Indicators Index for the Turkish Economy
Ali Mürütoğlu

Abstract
Business cycles, one of the main characteristics of developed countries’ economies, have begun to play an important role for the Turkish Economy. Especially after the 1994 crisis (which was one of the most severe one since the foundation of Turkish Republic) and the current slow-down of the economy (mainly because of the global crisis which stemmed from the south-east Asian countries and Russia), it has become vital to foresee the future of the economy (i.e. which phase the economy will be in the business cycle in the future) for the decision makers both in public and private sectors. Thus, it can be possible to take contrary actions to reduce the harmful effects of recessions.

One method of short-term forecasting of economic condition is the Leading Economic Indicators Approach which is the subject of this study. In this study, after explaining business cycles and Leading Economic Indicators Approach to forecast the business cycles, I analyze nearly 50 economic time series to find a Leading Economic Indicators Index for the Turkish economy. The resulting index is comprised of nine economic series which are standardized and composed with equal weight to form “The Leading Indicators Index for the Turkish Economy”. The series are as follows; Total Import of Investment Goods, Total Import of Intermediate Goods, Currency, M2, Reserve Money, Deposit Money Banks’ Credits, Net Credit Volume, Consolidated Budget Monthly Expenditures, Total Capital of Newly Established Firms.

Chaos Theory, Non-Linear Behaviour in Stock Returns, Thin Trading and Market Efficiency in Emerging Markets: The Case of the Istanbul Stock Exchange
Alper Özün

Abstract
This paper examines the weak form efficiency in the Istanbul Stock Exchange in the period between 1987 and 1998 by using daily ISE National 100 Index. Unlike previous empirical papers, it employs different methodologies to take account the effects of thin trading, non-linear behaviour in stock returns, changes in the volatility in the market and the time-variation in the market risk premium. By using chaos theory in physics, certain generalised auto-regressive models in econometrics and efficient market hypothesis in the financial theory, for the first time, we show that the ISE has been weak form efficient between 1987 and 1998 except for 1995 and 1996 in which there exists non-linear behaviour arising from risk loving and irrational behaviour of investors after 1994 economic crisis.

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