Foreign Investors and Noise Trade in Istanbul Stock Exchange
Prof. Dr. Güven Sevil, Prof. Dr. Mustafa Özer, Gülşah Kulalı

Abstract
As well known, in Istanbul Stock Exchange (ISE), most of the total market capitalization is constituted by foreign investors. This study aims to investigate whether foreign investors make their decisions about portfolio investments based on the information of ISE market index return or not, and to investigate whether their behavior has a causal effect on the changes in ISE market index return. After the time series analysis of variables, causality analysis results indicate that there is Vector Error Correction Granger Causality from buying of foreign investors to market index return for the analysis period indicating that excessive returns on market resulted from the buying of foreign investors might create new purchases. It is important that stock market index return does not Granger cause buying or selling of foreign investors. Foreign investors might make noise trading implying that the reason to buy or sell securities may result from the expectations and sentiments.

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