Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/340551 
Year of Publication: 
2025
Citation: 
[Journal:] Borsa İstanbul Review [ISSN:] 2214-8469 [Volume:] 25 [Issue:] 1 [Year:] 2025 [Pages:] 21-33
Publisher: 
Elsevier, Amsterdam
Abstract: 
Examining the gradual information diffusion hypothesis of Hong et al. (2007)in an emerging market context, we show that industry returns possess predictive information regarding the direction of the aggregate stock market in Borsa Istanbul, both in- and out-of-sample, and that the predictive power of industries is often magnified by crisis conditions. Several industries, including basic materials and consumer staples, have out-of-sample predictive power over the aggregate market, although out-of-sample predictability cannot be exploited to extract economic gains based on the direction of industry returns. Industry information emanating from the US stock market has significant spillover effects on Turkish industry returns, creating an opening for industry investment strategies for local investors. We show that foreign participation in the stock market facilitates the diffusion of information from US industries to Turkish industries and that the economic benefits from spillover effects can be as high as 60 percent on annual basis.
Subjects: 
Borsa istanbul
Gradual information diffusion
Industry and stock market returns
Return predictability
JEL: 
G14
G17
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
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