An Analysis of the Random Walk and Overreaction Hypotheses Through Optimum Portfolios Constructed by the Nonlinear Programming Model

This study aims to examine the validity of random walk and overreaction hypotheses for Turkeyʹs Istanbul Stock Exchange (ISE). In the study, the firmsʹstocks traded in the ISE National-30 during the period between 2003 and 2007 were examined and portfolios (normal, winners, losers) with three different return levels (index, index+10%, index-10%) were constructed using stock returns. The analysis showed no signs of the overreaction hypothesis in the ISE National-30 index, while certain findings were obtained indicating that stock returns moved in accordance with the random walk hypothesis