The Effect of Foreign Portfolio Investments in the ISE: An Index-Based Study

Foreign shares in the market of the developing countries increased to significant levels with the financial globalization. Istanbul Stock Exchange (ISE) is the only stock market of Turkey. It is seen that the foreign investors are generally institutional investors; their shares fluctuate around 65-70% and sometimes exceed over 70 %. Depending on these two factors, it is obvious that the foreign investors have a significant effect on the ISE indexes. This study aims to determine whether a change in the foreign share have an effect on the increases and decreases of the indexes calculated in the ISE and to determine the influence. The foreign share in the ISE and 12 index variables calculated in the ISE were adopted as the data set. Consequently, it was determined that the foreign investor movements were generally not the triggering factor in the increases and decreases in the ISE-100 index and the other indexes; on the contrary, the foreign investor increased or decreased their investments by following the movements (increase/decrease) in the other indexes.