The Retreat from BIST: Insights into Foreign Portfolio Investment Movements

Abstract

The need for rapid growth and development in developing countries increases the demand for capital. As a result, foreign portfolio investments are of great importance, especially in emerging markets, as they help meet capital needs. However, their ability to move quickly also introduces high volatility to financial markets. This study examines changes in the share of foreign portfolio investors in Borsa Istanbul from 2004 to 2023, aiming to provide long-term insights to market participants. Initially, changes in the foreign portfolio investor ratio over time are graphically analyzed alongside the BIST 100 index and the average interest rate of deposits with a maturity of up to 3 months. These changes are evaluated in the context of both global and local developments. The study then investigates the causal relationship between the foreign portfolio investor ratio and the BIST 100 index using a cointegration test and a causality test based on the VECM model. The findings show a one-way causality from the BIST 100 index to the foreign portfolio investor ratio, indicating that foreign investors' market movements are largely influenced by the performance of the BIST 100, and local market dynamics significantly affect foreign capital inflows.

Keywords

• yabancı portföy yatırımı
• borsa i̇stanbul
• nedensellik analizi
• foreign portfolio investment
• borsa i̇stanbul
• causality analysis