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An Empirical Examination of Bilateral Interaction Between Foreign Investors’ Trading and Returns in Turkey

Hasan F. Baklaci

Istanbul Stock Exchange Review, 2009, vol. 11, issue 42, 35-58

Abstract: This study attempts to determine the bilateral interaction between foreign investors’ trading activity and returns in Turkish stock market. The results imply a strong bilateral interaction between foreign investors’ trading and stock returns. The results from individual stock and market level analyses indicate that foreign investors closely follow stock returns in shaping their trading strategies. Likewise, foreign investor net inflows are also influential in stock returns providing evidence for the existence of “price-pressure“ effect. Furthermore, the findings of this study reveal that foreign investors frequently change their positions on majority of the stocks in Turkish stock market, which might basically stem from the absence of exit barriers in Turkish financial markets.

Keywords: Foreign investor; feedback effect; price pressure effect; causality; VAR (search for similar items in EconPapers)
JEL-codes: G15 G11 F30 (search for similar items in EconPapers)
Date: 2009
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