Revista Economica, cilt.75, sa.1, ss.7-18, 2023 (Hakemli Dergi)
The Arbitrage Pricing Theory (APT), based on arbitrage theory, emphasizes that a market can rebalance itself
After the occurrence of an arbitrage opportunity. This capability of financial markets confirms the Arbitrage
Pricing Theory. This study tests the validity of APT on the Istanbul Stock Exchange between the period of
January 2009 and March 2020 on BIST100. Purposing to determine the relationship between security returns
and other macroeconomic factor, it will serve as a compass for other emerging countries. With stock return
factor as independent variable, this study uses a Vector Error Correction Model (from the VAR family model)
with five macro-economic factors: GDP, interest rate, inflation rate, exchange rate and the countries’
production indexes. The resulting model depicts a negative Error Correction Term (ECT) which indicates the
validity of the model in the Turkish stock exchange.