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The Effect of Foreign Investors on Security Markets: The Case of Istanbul Stock Exchange

Guluzar Kurt Gumus

Istanbul Stock Exchange Review, 2010, vol. 11, issue 44, 58-85

Abstract: The study aims at analyzing the effect of foreign portfolio investment on Istanbul Stock Exchange (ISE). ISE-100 index, price/earnings ratio, value of share trading and market capitalizion are studied as indicators related with ISE. Foreign portfolio investment is examined as two subgroups: purchases and sales. Unit root tests, cointegration analysis and causality tests are employed in the study, which covers the period of 1997-2007. The results show that there is a long-run relation (cointegration) between purchases and sales of foreign investors, and ISE-100 index, trading volume and market capitalizion. The purchases of foreign investors have a positive effect and the sales of foreign investors have a negative effect on these indicators, and their explanatory power is quite high.

Keywords: Foreign portfolio investments; Istanbul Stock Exchange; cointegration analysis; causality analysis. (search for similar items in EconPapers)
JEL-codes: F21 G15 (search for similar items in EconPapers)
Date: 2010
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Handle: RePEc:bor:iserev:v:11:y:2010:i:44:p:58-85