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

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  • Hasan F. Baklaci

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.

Suggested Citation

  • Hasan F. Baklaci, 2009. "An Empirical Examination of Bilateral Interaction Between Foreign Investors’ Trading and Returns in Turkey," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 11(42), pages 35-58.
    • Handle: RePEc:bor:iserev:v:11:y:2009:i:42:p:35-58
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    File URL: http://www.borsaistanbul.com/datum/imkbdergi/EN/ISE_Review_42.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign investor; feedback effect; price pressure effect; causality; VAR;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • F30 - International Economics - - International Finance - - - General

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