Examining the Cointegrating and Causality Relationship between Foreign Portfolio Investments and the Securities Market Returns at the Botswana Stock Exchange

Thabang Ntshole () and Oscar Chiwira ()
Additional contact information
Thabang Ntshole: Department of Banking and Finance, Faculty of Commerce, BA ISAGO University, Gaborone, Botswana,
Oscar Chiwira: Faculty of Commerce, BA ISAGO University, Gaborone, Botswana.

International Journal of Economics and Financial Issues, 2026, vol. 16, issue 3, 73-82

Abstract: In the context of Botswana, the relationship between foreign portfolio investment and the stock market returns is unclear in both the short and long run. The study aims to empirically examine the relationship between foreign portfolio investments and securities markets performance at the Botswana Stock Exchange (BSE), covering the period 2004 to 2022. The study employed the Autoregressive Distributed Lag (ARDL) Bounds model to test for cointegration and the Toda and Yamamoto and Dolado and Lütkepohl (TYDL) model to examine the direction of causality. The findings suggest that current investment flows significantly enhance current stock market returns in the short run; considering macroeconomic factors such as interest rates, market capitalization and exchange rates. The study also finds that past investment flows do not Granger cause stock market returns, indicating that past investment flows do not contain sufficient information to predict future stock returns and past stock returns do not predict future investment flows. The BSE is urged to enhance data transparency and availability, implement risk management frameworks, improve financial market infrastructure, support capital market development, monitor and manage volatility as well as developing strategies to attract stable foreign investment.

Keywords: Foreign Portfolio Investments; Autoregressive Distributed Lag; Causality; Securities Market Returns; Botswana Stock Exchange (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://econjournals.com/index.php/ijefi/article/download/22987/10052 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:v:16:y:2026:i:3:id:22987

Ordering information: This journal article can be ordered from
https://econjournals.com/index.php/ijefi

DOI: 10.32479/ijefi.22987

Access Statistics for this article

More articles in International Journal of Economics and Financial Issues from International Journal of Economics and Financial Issues
Bibliographic data for series maintained by Monica Sinhat ().