Investigation of the Effect of Geopolitical Risks and CDS Spreads on the Number of Domestic and Foreign Investors ın Stock Exchanges: Evidence from Borsa Istanbul

Abstract

Purpose- The aim of this study is to reveal whether Turkey's geopolitical risk and CDS premium have an impact on the number of domestic and foreign investors in Borsa Istanbul through cointegration and causality tests using monthly data for the period January 2010-December 2023. Design/methodology/approach – In the study, time series analyzes were used. The stationarity of the variables was tested with Carrion-i Silvestre (2009) unit root test. The cointegrated relationship between variables was examined with Maki (2012) cointegration test. Finally, the causality relationship between the variables was tried to be determined with the Fourier Toda-Yamamoto test. Findings- While there is a long-term relationship between Turkey's geopolitical risk and the number of foreign investors in Borsa Istanbul, there is no long-term relationship between Turkey's geopolitical risk and the number of domestic investors in Borsa Istanbul. It appears that there is a long-term relationship between Turkey's CDS Spread and the number of both domestic investors and foreign investors in Borsa Istanbul. Additionally, it has been determined that there is no causal relationship between Turkey's geopolitical risk and CDS Spread and the number of both domestic investors and foreign investors in Borsa Istanbul. Discussion- When the results obtained in the analysis are examined, we can say that foreign investors follow both Turkey's geopolitical risk and CDS Spread. While domestic investors seem to take the CDS Spread into consideration, we can say that they do not take geopolitical risk into account. Differences in results may be due to domestic and foreign investors having different risk perceptions and investment perspectives.