(The Effect of the Change in the Foreign Investor Ratio Provided by International Capital Mobility on Borsa Istanbul)

Abstract

Purpose – Markets in the world are in a rapid change and development process. As a result of globalization and financial liberalization, international capital flows affect countries' financial investment instruments, markets and economies. Foreign capital flows enable the transfer of resources, information and technology as well as capital inflows to the country. The different market dynamics of each country differentiates the rate of domestic and foreign investors investing in capital markets. The purpose of this study is to investigate the effect of daily foreign investor rate on Borsa İstanbul BIST100 index. Design/methodology/approach – In order to show the effect of the foreign share ratio in Borsa Istanbul on the BIST100 index, the Vector Autoregressive Model (VAR) analysis were conducted. To reveal the causality relationship between these two variables, Toda Yamamoto causality tests were used. Findings – It has been determined that there is a two-way relationship between BIST100 and foreign share ratio, changes in BIST100 affect the rate of foreign investors, changes in foreign share affect BIST100, and BIST100 and foreign share ratio have a long-term relationship in the rise and fall. In addition, while 17% of the change in the share of foreign investors was due to changes in BIST100 as of the 3rd period, it was determined that the change in the BIST100 index for the period examined was not due to the change in the rate of foreign investors, as almost all of the change in BIST100 originated from itself. Discussion – The average proportion of foreign investors in Turkey are as high as 67% for the period investigated. The high rate of foreign share requires a correct analysis of its effect on capital markets and an accurate assessment of its effects on the economy. Although international capital flows provide the necessary resources for growth, the existence of sudden outflows in the event of a crisis will make the markets more fragile, so the analysis of the effects of the change in foreign shares on the capital markets before and after the crisis can be an important assessment element for policy makers.