Does the Recent Global Financial Crisis Affect Efficiency of Capital Markets of EU Countries and Turkey?

Abstract

Efficient market is one in which prices Ally reflect all available information. However, financial crisis has created big volatility in prices of financial assets, which induces some barrier in reflection of full information and multiplies the effectiveness of a crisis in a country according to the third generation crisis theory. Therefore, the paper aims to question whether the recent global financial crisis has affected efficiency of markets of new European Union (EU) countries and Turkey differently. Therefore, it focuses on Turkish and EU stock markets, and their stock market performances comparing the efficiencies of new member countries and Turkey since Turkey is in the process of accession to the EU and thus, it projects that if or not Turkey will prospectively be the part of the EU according to stock market performance. Thus it employs the appropriate GARCH models and uses data of stock exchange market indices of related countries. Test results present evidences of weak-form efficiency pre- and post-crises period for some countries, and in general, present that Turkey performs much better, in terms of market efficiency, than most of the newly joined EU countries.