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Investigation of Prudent Investment Hypothesis in ISE


  • Serkan Yilmaz Kandir


Aim of this study is to examine whether institutional investors pursue prudent investment policy in ISE. Empirical analysis is performed by examining the difference among various firm characteristics of company portfolios constructed according to institutional ownership for the years, 2005, 2006 and 2007. Firm characteristics are market value, leverage ratio, turnover ratio, standard deviation of stock returns and return-on-assets. Analysis results suggest that institutional investors invest prudently in ISE companies. Institutional investors seem to prefer companies with big scale, high level of return-on-assets, low level of total risk, stock liquidity, and leverage ratio.

Suggested Citation

  • Serkan Yilmaz Kandir, 2009. "Investigation of Prudent Investment Hypothesis in ISE," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 3(1), pages 81-100.
  • Handle: RePEc:bdd:journl:v:3:y:2009:i:1:p:81-100

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    References listed on IDEAS

    1. Denis, David J. & Osobov, Igor, 2008. "Why do firms pay dividends? International evidence on the determinants of dividend policy," Journal of Financial Economics, Elsevier, vol. 89(1), pages 62-82, July.
    2. Eugene F. Fama & Kenneth R. French, 2001. "Disappearing Dividends: Changing Firm Characteristics Or Lower Propensity To Pay?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(1), pages 67-79.
    3. Ferris, Stephen P. & Sen, Nilanjan & Yui, Ho Pei, 2006. "Are fewer firms paying more dividends?: The international evidence," Journal of Multinational Financial Management, Elsevier, vol. 16(4), pages 333-362, October.
    4. Adaoglu, Cahit, 2000. "Instability in the dividend policy of the Istanbul Stock Exchange (ISE) corporations: evidence from an emerging market," Emerging Markets Review, Elsevier, vol. 1(3), pages 252-270, November.
    5. Mustafa Kemal Yilmaz, 2003. "An Analysis on the Dividend Policy of the Istanbul Stock Exchange (ISE) Corporations: Cash Dividend-Industry Behavior Relation," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 7(25-26), pages 19-40.
    6. Aivazian, Varouj & Booth, Laurence & Cleary, Sean, 2003. "Dividend policy and the organization of capital markets," Journal of Multinational Financial Management, Elsevier, vol. 13(2), pages 101-121, April.
    7. von Eije, Henk & Megginson, William L., 2008. "Dividends and share repurchases in the European Union," Journal of Financial Economics, Elsevier, vol. 89(2), pages 347-374, August.
    8. Amustafa Kemal Yilmaz & Guzhan Gulay, 2006. "Dividend Policies and Price-Volume Reactions to Cash Dividends on the Stock Market: Evidence from the Istanbul Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(4), pages 19-49, July.
    9. Varouj Aivazian & Laurence Booth & Sean Cleary, 2003. "Do Emerging Market Firms Follow Different Dividend Policies From U.S. Firms?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(3), pages 371-387.
    10. DeAngelo, Harry & DeAngelo, Linda & Skinner, Douglas J., 2004. "Are dividends disappearing? Dividend concentration and the consolidation of earnings," Journal of Financial Economics, Elsevier, vol. 72(3), pages 425-456, June.
    11. Brandon Julio & David L. Ikenberry, 2004. "Reappearing Dividends," Journal of Applied Corporate Finance, Morgan Stanley, vol. 16(4), pages 89-100.
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    More about this item


    Institutional Investors; Prudent Investment Hypothesis; ISE;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill


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