The effect of foreign portfolio investments on stock price: BIST-30 analysis

A country's current account deficit is when all foreign currency outflows are greater than all foreign currency inflows. Many studies have been carried out on current account deficit financing and its problems, and their effects on countries' financial development levels have been examined. Turkey, which is among the developing countries, is also a country that has a current account deficit except during contraction periods. Portfolio investments in Turkey and similar countries, which have a current account deficit that is higher than the period averages in order to grow, are important to provide financing resources. Foreign portfolio investments mean that investors in countries with surplus capital make securities investments in countries with capital deficits. When the studies on foreign portfolio investments are examined, it is seen that these studies mostly deal with the factors affecting foreign portfolio investments. The aim of this study is to examine the effect of foreign portfolio investments in companies traded in the BIST-30 index after the 2008 crisis on the market value, stock closing price and stock return of companies. Another aim of the study is to examine the effects of macroeconomic variables such as real effective exchange rate, CPI index and current account deficit. In the study, 6 different models were tested. In the first model, the relationship between foreign share and market value is examined. As a result of the regression analysis, a positive and significant relationship was determined between the foreign share and the market value. In the second model, the relationship between foreign share and closing price is examined. Accordingly, a significant and positive low correlation was found between the foreign share and the closing price. In the third model, the relationship between logarithmic return and foreign share is tested. No significant relationship was observed between the two variables. In the fourth model, market value and foreign share, real effective exchange rate, CPI and current account deficit are examined. According to the results of the multiple regression analysis, all variables affect the market value significantly and positively. In the fifth model, significant relationships between foreign share, real effective exchange rate, CPI, current account deficit and closing price were expected, and multiple regression analysis was performed. According to the results of this analysis, real effective exchange rate, CPI and current account deficit affect the closing price significantly and positively. Foreign share did not significantly predict the outcome variable in this model. In the sixth and last model, it was suggested that there is a significant relationship between foreign share, real effective exchange rate, CPI, current account deficit and stock return, and multiple regression analysis was performed. According to the results of this analysis, the real effective exchange rate, CPI and current account deficit affect the stock return in a significant and positive way. Foreign share have a significant and negative effect on stock returns. Although the findings of the research differ from model to model, they provide information about the general tendencies of foreigners. The findings shed light on the effects of portfolio investments on the market value of companies for investors and researchers.