Benford’s Law and an Analysis in Istanbul Stock Exchange (BIST)

Abstract

Benford's Law, which has a logaritmic base, is a simple but an effective analytical examination tool for researchers. It makes researchers determine abnormalities in numerical data clusters. Benford's Law as a numerical analytic test is a mathematical comparison which proves unnatural deviations in data analysis. For that reason, it has various application areas such as auditing and finance. Investors may use Benford's Law for finding out financial frauds and abuses. This paper aims to test stock market indexes and stock values in Istanbul Stock Exchange (BIST) whether they fellow Benford's Law of Anomalous Numbers or not. All indexes' closing values and stocks' closing values, stocks' monthly gains and losses were also examined. In this study, it was found that series of monthly gains and losses on the twenty-eight indexes reasonably agree with Benford's Law.