NON-LINEAR STRUCTURE OFINSURANCE STOCK RETURNS

With the development of the market in recent years, investors are looking for new sectors that can provide high returns. the finance theory relies on the efficient market hypothesis that means abnormal return is not possible. however, the nonlinear structure of returns shows it is possible to earn abnormal returns. therefore, the aim is to test the linearity of xsgrt index that is constructed from insurance companies in borsa istanbul as an alternative for the investors. in this study, the most popular brock, dechert ve scheinkman (bds) linearity test is applied to the residuals that are obtained from generalized autoregressive conditional heteroskedasticity (garch) model. according to bds test, we reach that the returns of insurance industry index has non-linear dependency.