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

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  • Guluzar Kurt Gumus

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.

Suggested Citation

  • Guluzar Kurt Gumus, 2010. "The Effect of Foreign Investors on Security Markets: The Case of Istanbul Stock Exchange," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 11(44), pages 58-85.
    • Handle: RePEc:bor:iserev:v:11:y:2010:i:44:p:58-85
    as

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    File URL: http://www.borsaistanbul.com/datum/imkbdergi/EN/ISE_Review_44.pdf
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    More about this item

    Keywords

    Foreign portfolio investments; Istanbul Stock Exchange; cointegration analysis; causality analysis.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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