Foreign equity flows and the “Size Bias”: Evidence from an emerging stock market

Erkin Diyarbakirlioglu

Emerging Markets Review, 2011, vol. 12, issue 4, 485-509

Abstract: This paper examines foreign investors' equity-level transactions in an emerging stock market, the Istanbul Stock Exchange, for the period 1997–2008 to derive insights into the debate on information asymmetries between domestic and foreign investors and the home bias puzzle. The analysis suggests two important findings. First, foreign investors do not consider the market portfolio of domestic securities as predicted by standard theories of international portfolio diversification. Second, the firm's size and the expected return are central to explain foreign investors' equity trades. The results are consistent with models based upon the hypothesis of differential information between foreign and domestic investors.

Keywords: Information asymmetries; Foreign investors; Portfolio flows; Istanbul Stock Exchange; Home bias (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:12:y:2011:i:4:p:485-509

DOI: 10.1016/j.ememar.2011.08.002

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