4. THEORETICAL BACKGROUND Since the original work of Fama (1965 and 1970), where an informationally efficient market was defined as one in which "stock prices 'fully reflect' all available information" (Fama 1970) and market efficiency was classified into three levels: weak form, semi-strong form and strong form. First, information provided through a low efficiency form only reflects historical prices or returns. Second, information presented in semi-strong efficiency form contains information accessible to all market participants. Finally, in a strong form of efficiency, the information set includes all the information available to any market participant. The research task in this study is whether stock market asset returns are predictable, an issue that has received much attention with financial econometrics since early times. Mathematical models of asset pricing have an unusually rich history compared to all other aspects of economic analysis. For return predictability testing, the information set is defined as stock price history, company characteristics, market characteristics, and time of year. The efficient market hypothesis was first introduced by Louis Bachelier, a French mathematician in 1900, in his thesis. The efficient market hypothesis (EMH) means that security prices fully reflect all available information. The market efficiency hypothesis was divided into three categories based on the information set: weak, semi-strong, and strong. These classifications were initially suggested by Fama (1970).4.1. Weak Form Tests of Market Efficiency Weak form tests of market efficiency are tests of whether all information... middle of paper ...... comes from information accessible to the audience. Other researchers have performed time series analyzes of stock returns as well as the cross-sectional distribution of individual stock returns to determine whether profit opportunities exist (Damodaran, 1996; Reilly and Brown 2003).4.3. Strong Form Tests of Market Efficiency Finally, strong form tests of market efficiency are tests of whether the information set consisting of all information available to any market participant is fully reflected in asset prices and whether any type of investor can make excess profit (Elton and Gruber). , 1995). Under such rigorous tests of the efficient market hypothesis, no one can make excessive profits. In reality, the laws prohibit transactions using inside information. The groups normally tested are corporate insiders, stock market specialists, security analysts and professional asset managers..