THE IMPACTS OF INTERNATIONAL PORTFOLIO INVESTMENTS ON ISTANBUL STOCK EXCHANGE MARKET

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1 THE IMPACTS OF INTERNATIONAL PORTFOLIO INVESTMENTS ON ISTANBUL STOCK EXCHANGE MARKET ABSTRACT Karal SOMUNCU Mehme Baha KARAN The am for hs sudy s o nvesgae he role of nernaonal nvesors durng he fnancal crss n The mpacs of wo basc nvesmen sraeges of nernaonal nvesors on Isanbul Sock Exchange had been analyzed durng he crss and afer crss perod ha s beween These nvesmen sraeges are posve feedback radng and herdng. Prevous researches have revealed ha foregn nvesors are more successful n mng of buyng and sellng secures. In addon here s oo much dscusson abou herdng behavors of he nsuonal nvesors. Man daa of hs sudy s he monhly sock posons of 455 acve fnancal nsuons ha are provded from Isanbul Sock Exchange Takasbank and Fnne Fnancal Informaon Company. The fndngs revealed ha he foregn nvesors was engaged n negave feedback radng acvy ha was sablzed he fnancal marke durng he crss whereas domesc nvesors caused he nsably n markes by engagng n posve feedback radng. The second oucome of he sudy was relaed wh he herdng behavor of nvesors. I s found ha he boh of nvesor groups have been parcpaed he herdng behavor n he marke no only n he peak perod of he crss bu also pos crses perods. Keywords: Porfolo nvesmen hedge funds posve feedback radng negave feedback radng herdng. ÖZET ULUSLARARASI PORTFÖY YATIRIMLARININ İMKB ÜZERİNDEKİ ETKİSİ Bu çalışmanın amacı uluslararası yaırımcının 2001 fnans krzndek rolünü araşırmakır. Bu amacı gerçekleşreblmek çn yılları arasında uluslararası yaırımcıların k emel yaırım sraelernn İsanbul Menkul Kıymeler Borsası Yrd. Doç. Dr. Afyon Kocaepe Unversy Deparmen of Busness Admnsraon Pr. Dr. Haceepe Unversy Deparmen of Busness Admnsraon SAYIŞTAY DERGİSİ SAYI:

2 üzerndek ekler analz edlmşr. Bu yaırım sraeler olumlu ger besleme care ve sürü eks davranışıdır. Daha önce yapılmış çalışmalarda yabancı yaırımcıların hsse senelern alma ve sama zamanlamalarının daha başarılı olduğunu göseren sonuçlar elde edlmşr. Ayrıca sürü eks davranışı konusunda yapılan çalışmalarda çok sayıda brbr le çelşen sonuçlar elde edlmşr. Ver se İsanbul Menkul Kıymeler Borsası Takasbank ve Fnne Fnansal Blg Hzmeler kurumlarından elde edlmşr. Bu verler İMKB de hala akf olarak alım saım şlem yapan 455 ade fnans kurumunun ay sonu hsse sened akas bakyelerdr. Bulgular yabancı yaırımcıların krz süresnce olumsuz ger besleme care le uğraşmalarına rağmen yerl yaırımcıların olumlu ger besleme care le uğraşıklarını gösermekedr. İknc bulgu se hem yabancı yaırımcıların ve hem de yerl yaırımcıların dönemnn amamında sürü eks davranışının eksnde kaldıklarını gösermekedr. Dolayısı le krz dönem ve sonrası çn sürü eks davranışı açısından ayır edc br bulguya raslanmamışır. Anahar Kelmeler: Porföy yaırımı serbes fonlar olumlu ger besleme care olumsuz ger besleme care sürü eks davranışı. INTRODUCTION One of he mporan developmens n nernaonal fnancal markes over he las decade has been he growng role of foregn porfolo nvesmen as a channel for nernaonal capal flows o developng counres. The ncreased flows of secures nvesmen from ndusralzed counres o emergng markes was made possble by a number of developmens n all he counres nvolved. Maor sources for foregn porfolo nvesmen n developng counres were he predomnanly U.S.- based emergng markes muual funds whch led he surge n nvesmen n emergng marke eques. Some of hese funds seek o denfy counres where macroeconomc varables far ou of lne wh susanable values so ha changes n asse prces wll be large when hey fnally occur. However he fnancal crses drven from he reverse n capal nflows lead o he dscusson on he role of marke players. The counres benefed from access o global capal markes mprovemen n resource allocaon wll be open he rsk of nernaonal capal movemens and nvesmen funds. Bous of urbulences n nernaonal fnancal markes n recen years have drawn aenon o he role played by nsuonal nvesors especally hedge funds. Followng he crss n Asa Russa and Turkey was suggesed ha hedge fund nvesmens precpaed maor developmens n 150 SAYIŞTAY DERGİSİ SAYI: 77

3 asse prces eher drecly hrough her own ransacons or ndrecly va he endency of oher marke parcpans o follow her lead. We assumed n he sudy ha he mos of he nernaonal funds n Turksh capal markes are hedge funds or he funds have smlar feaure. One popular generalzaon s ha hedge funds are nmble and quck off he marke. Ther managers have a repuaon for asueness. I has been beleved ha he hedge funds are akng a poson may hus encourage oher nvesors o follow. Sysemac evdence on hese relaons s scany. An analyss on daa repored o he US Commody Fuures Commsson by fnancal nsuons who ake large posons n fuure markes found ha hedge funds herd among hemselves n he Sandard and Poor s 500 ndex conrac and he hree monh Eurodollar conrac. Smaller funds were deeced as herdng wh larger ones n he Japanese yen conrac and Sandard and Poor s 500 ndex conracs. The am of hs paper s o analyze he nvesmen radng sraeges whch are generally appled by foregn porfolo nvesors n an emergng economy Turkey whch s suffered from fnancal crss n These radng sraeges are posve feedback radng and herdng. Prevous researches have revealed ha foregn nvesors are more successful n mng of buyng and sellng secures. In addon here s oo much dscussng abou herdng behavors of he nsuonal nvesors. In he frs par of our sudy he prevous sudes on radng sraeges of nvesors wll be dscussed and explaned. An emprcal sudy on he Turksh marke wll be appled n he second par of he sudy. In he hrd par of he fndngs of he research wll be evaluaed. 1. Prevous Sudes on Tradng Sraeges of Invesors 1.1. Posve Feedback Tradng - Momenum Process: I s clamed ha nernaonal offshore funds may engage n radng behavors ha are dfferen from her domesc onshore counerpars. Inernaonal funds may engage n posve feedback radng more aggressvely han domesc funds and ha posve feedback radng could desablze he marke. A posve feedback radng paern s when one buys secures when he prces rse and sells when he prces fall. In oher words nvesors rush o buy when he marke s boomng and rush o sell when he SAYIŞTAY DERGİSİ SAYI:

4 marke s declnng Ths radng paern can resul from exrapolave expecaons abou prces from sop loss orders auomacally sellng when he prce falls below a ceran pon from forced lqudaons when an nvesor s unable o mee her margn calls or from a porfolo nsurance nvesmen sraegy whch calls for sellng a sock when he prce falls and buyng when he prce rses. Grnbla Tman and Werners 1995 alleged ha nernaonal porfolo nvesors should be mpeuous o engage n posve feedback radng wh her sample of 274 U.S. muual funds durng They also found ha offshore funds may be more prone o hs knd of radng paern han her onshore counerpars eher due o he naure of her nvesmen syles or due o lower regulaory consrans hey face a home. However usng quarerly daa on U.S. penson funds n he U.S. marke Lakonshok Shlefer and Vshny 1992 dd no fnd srong evdence of sgnfcan feedback radng. Tesar and Werner and Brennan and Cao 1997 dscovered ha nernaonal prces end o rse when nernaonal nvesors purchase. Froo O Connell and Seasholes 2001 use measures of daly nernaonal nvesor flows across a wde number of counres and fnd evdence ha suggess a leas a poron of he prce ncrease occurs subsequen o nernaonals purchases. These sudes reveal ha nernaonal nvesors have more nformaon han he domesc nvesors and hey may use hs nformaon o ancpae domesc-marke equy reurns. Dornbusch and Park 1995 clamed ha snce he foregn nvesors ransacons are affeced by prevous performances hey end o purchase shares when he prces of shares are ncreasng and sell when he prces decreasng. Bohn and Tesar 1996 Frankel and Schmukler Brennan and Cao 1997 found he evdences on posve feedback radng n nernaonal markes. Choe Kho and Sulz analyzed Korean shares before and afer he crss o scrunzed how he foregn nvesors affec he prce of Korean shares. They found evdences relang o posve feedback radng n before crss perod. Resul ndcaes ha no only foregn nvesors bu also ndvdual Korean nvesors bough he shares before he Korean crss and 152 SAYIŞTAY DERGİSİ SAYI: 77

5 hen hey sold her shares when he marke was declnng. There are conssency beween hs resul and evdences found by Froo O Connell and Seashole Kamnsky Lyons and Schmukler 2000 examned he radng behavor of he muual funds ha nves n Lan Amerca. They found evdence of posve feedback radng boh among he managers of he muual funds and among he ulmae nvesors n he muual funds. In order o es he posve feed back radng and herdng behavor n nernaonal markes Froo O Connell and Seashole analyzed he nflows and ouflows of nernaonal porfolo nvesmens n 44 counres durng he perod of They found srong evdence abou posve feedback radng. In addon; hey also found ha flows of nernaonal nvesmens are mporan varable o predc he fuure value of asses. Froo and Ramodora 2001 found a sgnfcan relaon beween nernaonal porfolo funds wh prces of closed-end funds. On he oher hand Km and We 2001 and 2002 could no fnd any evdence abou he posve feedback radng of foregn nvesors so hey dd no suppor he argumen abou he posve role of foregn nvesors n nernaonal crses Herdng Herdng Herd behavor s he erm used o descrbe suaons n whch a group of ndvduals reac coherenly whou here beng any coordnaon beween hem. Bkhchandan Hrshlefer and Welch 1992; and Baneree 1992 ndcaed ha nformaonal asymmery may cause unnformed bu raonal speculaors o choose o rade n he same way as nformed raders. Parcularly nformaon problem s more mporan n foregn markes so herd behavor may more mpac on hese markes. Wheher nernaonal funds herd more or less han he domesc funds depends on her relave capacy n collecng and processng nformaon abou he emergng marke n queson. There s an alernave explanaon foe herdng among nsuonal nvesors. Unlke ndvdual nvesors fund managers face regular revews e.g. quarerly for muual funds and annually for penson funds on her performance relave o a benchmark and/or o each oher. Ths may nduce SAYIŞTAY DERGİSİ SAYI:

6 hem o mmc each oher s radng o a greaer exen han hey oherwse would Scharfsen ve Sen There have been several emprcal papers ha quanfy herdng behavor. Usng daa on nsuonal nvesors he poneerng paper by Lakonshok Schlefer and Vshny 1992 followed by Grnbla Tman and Wermers 1995 and Wyle 1997 all repor evdence of herdng among U.S. or U.K. nsuonal nvesors. In addon Dornbusch and Park 1995 found some evdence on herdng behavors among foregn nvesors. Wyle found he smlar resuls; Choe Kho and Sulz 1999 proved he herdng behavor n Korea marke usng daa on foregn nvesors or U.S. nvesors n Korea as a sngle group. Froo O Connell and Seasholes 2000 found ha he herd behavor s more common among nernaonal nvesors durng crss perods han bu n normal perods. However Km and We 2001 revealed ha domesc nsuonal nvesors more reac coherenly han nsuonal foregner nvesors n Korea durng he perod of Isanbul Sock Exchange and Fnancal Crss n 2001 Isanbul Sock Exchange ISE was esablshed n 1986 s foundaon s an mporan mlesone n fnancal lberalzaon n Turkey. The exchange has shown remarkable growh boh n erms of radng volume and number of lsed companes. As of he Aprl 2005 wh 300 lsed companes annual marke capalzaon reached $95 bllon and annual radng volume sood a $66 bllon. These fgures pu ISE ahead of many emergng markes and comparable o smaller Wesern European exchanges Fgure SAYIŞTAY DERGİSİ SAYI: 77

7 Fgure 1. Emergng Markes Tradng Volume Aprl 2005 Counres Argenna Phlppnes Chle Hungary Poland Israel Mexco Indonesa Malasa Greece Sngapure Thaland Brazl Souh Afrca Turkey Chna Inda Hong Kong Tawan Souh Korea Mllon USD The Secury Marke Board of Turkey s he man regulaory agency ha provdes ransparency n he marke. Inernaonal fnancal nvesors can easly nflow and ouflow her capal due o he lberal fnancal regulaons of Turkey snce Afer he fnancal lberalzaon foregn porfolo nvesors have sared o nves n governmen deb secury marke and publcly radng Turksh companes n ISE: As s shown n fgure 2 equy porfolo holdngs of nernaonal nvesmens n ISE have been flucuaed n recen years from 36% o 65%. Foregn nvesors generally decrease her sock holdngs n crss years and ncrease n boom years as we expeced. They prefer nvesng n fundamenally bgger and sronger companes ncluded n he ISE 100 ndex snce hose are more lqud. There are 110 brokerage companes 31 banks 11 nvesmen banks ha are he member of ISE. In addon here are muual funds and nvesmen companes ha are servng o domesc and foregn nvesors as of May SAYIŞTAY DERGİSİ SAYI:

8 Fgure 2: Ne Invesmens and Equy Porfolo Holdngs of Foregn Porfolo Invesors mllon US$ The man feaure of he ISE s s marke volaly. I has become one of he bes and he wors performng sock markes of world n he las 15 years. The man reason for hs volaly s he counry's economc and polcal upheavals. There were wo man facors ha should be consdered whle analyzng he ISE regardng he counry s economy before These were hgh nflaon and hgh nernal deb. Durng he perod 1995 o 2003 he nflaon rae has flucuaed around 75%. The second mporan facor ha should be consdered s hgh nernal deb occurred because of he requremen of borrowng by he governmen. Durng he perod 2000 o 2003 he average oal deb o GNP rao has flucuaed around 70%. The problem s sems from he fac ha hs deb s almos all-shor erm and depend on foregn porfolo nvesmens. Unsable economc envronmen and hgh sysemac rsk parcularly have affeced he fundamenal values of small and md-scale frms and changed he nvesmen behavor of boh foregn and nsuonal nvesors. The nvesmen horzon of nvesors has 156 SAYIŞTAY DERGİSİ SAYI: 77

9 become shorened. Consequenly bg and relavely fundamenally srong frms have been preferred by nsuonal and foregn nvesors. Unforunaely Turksh economy ha had weak macroeconomc ndcaors could no make use of he opporunes provded by expanded access o nernaonal markes whou adequae apprecaon of he rsks and faced wh hree mporan fnancal crses n and The las one s was he sronges. Afer gong hrough a seres of shor erm economc problems n 1990s Turkey enered a perod of severe fnancal crss n he begnnng of 2000s. The crss whch frs revealed self as a warnng sgnal n November 2000 and eruped n full scale n February GDP of Turkey decreased and unemploymen ncreased o 12% n ha year. The mos drec ndcaors of he crss over he fnancal markes were rapd rae of deprecaon of he Turksh Lra and he sudden hke of he raes of neres on he governmen s deb nsrumens. Afer he second quarer of 2001 USD/TL nomnal pary has ncreased by quarerly raes of 96.5% 116.5% and 114.5% sablzed only n November of 2001 Yeldan Snce he holdngs of foregn nvesors n ISE decreased n he crses perod he role of he porfolo nvesmens n rggerng he crses had been examned. In order o solve he economc problems Turksh governmen appled a new economcs program wh he suppor of he Inernaonal Moneary Fund IMF and mplemened he reforms ha had demanded by IMF: The reforms have been appled durng he 2001 and Then he economy has sared o mprove and acheve macroeconomc sably. The mos mporan evens ha nfluenced he economy afer he crss were he general elecons n 2002 and Iraq war n Hypohess Snce he am of he sudy s o analyze he mpac of he foregn porfolo nvesmens n Turkey we searched he man wo nvesmen sraeges of nernaonal nvesors ha are menoned n prevous secons n Isanbul Sock Exchange. The hypoheses of hs sudy are: 1- Foregn nvesors are engaged n posve feedback radng more aggressvely han domesc nvesors and ha posve feedback radng are desablzed he Turksh marke. SAYIŞTAY DERGİSİ SAYI:

10 2- Foregn nvesors herd more han he domesc nvesors n Isanbul Sock Exchange Daa Man daa of hs sudy s he monhly sock posons of fnancal nsuons ha are provded from Isanbul Sock Exchange Takasbank ha s unque clearng company of Turksh Capal Marke and Fnne Fnancal Informaon Company. Fnne s he one of he man daa base for Turksh companes. I has been served for nsuonal and ndvdual nvesors snce Ths sudy covers he perod of December o December monhs. Snce he daa has no been classfed as nsuonal nvesor ndvdual nvesor or nernaonal fund we are compelled o use ransacon daa of he brokerage companes banks muual funds and nvesmen companes of Isanbul Socks Exchange. Accordng o Turksh capal marke regulaon brokerage companes are man nermedaon nsuons ha marke parcpans have o do all ransacons abou socks va hem. However Takasbank classfes hese ransacons n nsuonalzed base he ransacons ha are done by brokerage companes banks muual funds and nvesmen companes are placed n her accouns a he end of he day and nform he publc. The monh end sock posons and ransacons of ndvdual nvesors are seen n he accouns of brokerage companes. On he oher hand he ransacons of foregn nvesors are lsed n separae accouns. Fnne collecs hs nformaon and nforms he cosumers snce December Accordng o he Fnne daa here are 520 fnancal nsuons ha have accouns n he ls of Takasbank however 455 of hem were acve durng o perod. I s noed ha he number of acve fnancal nsuons vares n monhly perods. 85 of hem were servng o foregn nvesors. Monhly and US dollar denomnaed daa of fnancal nsuons wll be used n hs sudy. Monh end common sock balances of he fnancal nsuons are assumed o reflec he nvesmen posons of hem. On he oher hand only he daa of companes ha are n he ls of ISE Naonal- 100 Index are ncluded n he sudy. Ths ndex has been calculaed snce he ncepon of he ISE ha s composed of Naonal Marke companes excep 158 SAYIŞTAY DERGİSİ SAYI: 77

11 nvesmen russ. The consuens of he ISE Naonal-100 Index ha represens s abou 90% of lsed companes of ISE are seleced on he bass of pre-deermned crera dreced for he companes o be ncluded n he ndces. ISE Naonal-100 Index conans he ISE Naonal-50 and ISE Naonal- 30 Index companes. In order o undersand nvesmens sraeges of foregn nvesors he oal perod s dvded no four sub perods ha reflecs he dfferen sages of 2001 fnancal crss as seen n Table 1. Perod I covers he hoes par of he crss. Afer he peak crss perod he reforms are mplemened and marke parcpans observed very closely he drecon of he marke durng he second perod. Snce he coalon governmen ha serves he Turkey durng he perod of los her suppor because of he economc problems he agenda of nvesors durng he year of 2002 was he general elecons and he polces of he new governmen. Durng he perod III expecaons of nvesors have dreced he markes. Economy has been sablzed afer he elecons bu he Iraq war has ncreased he enson of fnancal markes durng he Perod IV shows he resul of economc sablzaon program. Table 1: Sample perods Perods Dae Evens Perod I Jan/2001-Dec/2001 Peak perod of he crss Perod II Jan/2002-Dec/2002 Reforms mplemened and general elecons Perod III Jan /2003-Dec/2003 Iraq war and economc sablzaon Perod IV Jan/2004-Dec/2004 Resuls of economc sablzaon Toal Perod Dec/2000-Dec/2004 From crss o sablzaon 2.4. Mehodology Two dfferen mehodologes are used n he sudy o measure he effcency of he each radng sraegy of foregn nvesors. The posve radng mehodology of hs sudy depends on he sudy of Grnbla Tman and Wermers 1995 ha was modfed by Kamnsky Lyons and Schmukler Ths measure s adaped for nvesor groups by Km and We The herdng measure Lakonshok Shlefer and Vshy 1992 s employed. Ths SAYIŞTAY DERGİSİ SAYI:

12 measure shows he correlaon n herdng paerns among members of a group Posve Feedback Tradng Momenum Process. The measure of posve feedback radng consders he connecon beween nvesors radng on parcular socks and pror performance of he socks. me 4 Q k Q k 1 M k R 1 * Q k Qk = The number of shares of sock s held by nvesor group k a Q*k = The average of Qk and Qk-1 R-1= The reurn on sock from -2 o -1 The momenum measure for a parcular nvesor group k over a gven sample perod s 1 5 Mk = M k JT J= The oal number of socks raded by k T= The oal number of me perods We expec ha f here s no feedback radng n eher drecon he mean value of Mk would be zero. In he case of sysemac posve radng Mk would be posve and sysemac negave radng Mk would be negave Herdng Behavors The measure of Lakonshok Shlefer and Vshy consders he correlaon n herdng paerns among members of a group. H s he herdng ndex and formula s gven below. 160 SAYIŞTAY DERGİSİ SAYI: 77

13 SAYIŞTAY DERGİSİ SAYI: p S B B E p S B B H 7 N N N S B B p B= The number of nvesors n group ha have ncreased he holdngs of sock n monh Number of ne buyers S= The number of nvesors n group ha have decreased he holdngs of sock n monh Number of ne sellers p = The number of ne buyers n group aggregaed across all socks n monh dvded by he oal number of acve raders n group aggregaed across all socks n monh number of ne buyers plus number of ne sellers 8 N H N H N T H NT H H;= The herdng ndex for group Monh averaged across all socks. H= The herdng ndex for group averaged across all monhs n he sample The reason of subracng p from H s o make guaranee ha he fnal ndex s nsensve o general marke condons. As seen n equaon 6 calculaon of herdng ndex depends on absolue values. Thus he frs erm n he equaon reveals how much of he nvesmen s polarzed n he drecon of eher buyng or sellng. The second erm n equaon 6 s called as adusmen facor. I s subraced o correc for he mean value of he frs erm under assumpon of no herdng. Adusmen

14 facor can be compued under he assumpon ha B follows a bnomal dsrbuon. Noe ha for large N and T H and H follow normal dsrbuons by he cenral lm heorem. 3. Fndngs Ths sudy reflecs only monh end sock posons of domesc and foregn nvesors he ransacons n he monhs are no ncluded n he sudy. On he oher hand he fnancal nsuons ha her monh end balance do no vares from one monh o he nex n oher words he nacve nsuons are also excluded. Table 2 repors he basc fndngs n posve feedback radng. The resuls of whole perod of he sudy are sascally sgnfcan and reflec negave feedback radng for foregn nvesors and posve feedback radng for domesc nvesors. Table 2: Momenum Tradng Perods Foregn Invesors 1 Domesc Invesors 2 Toal Perod ** * [84] [271] Perod I * [70] [197] Perod II * [74] [195] Perod III [62] [211] Perod IV [59] [213] Sandard errors are n he parenheses and Number of observaons are n bracke. **ndcae sgnfcance a 1% * ndcae sgnfcance a 5% Dfference 3 = ** * SAYIŞTAY DERGİSİ SAYI: 77

15 The resuls ndcae ha foregn nvesors sell buy he shares whle he prces of he shares are ncreasng decreasng however he domesc nvesors ha engage n posve feedback radng buy sell he shares whle he prce of he shares s ncreasng decreasng. The oucomes of frs perod ha covers he peak of he crss reveals he smlar resul. The endency of foregn funds o engage n he negave feedback radng sraegy durng ha perod s sgnfcanly greaer han he domesc funds a fve percen level. On he oher hand for he las hree sub perods of he analyss here s no sascally sgnfcan evdence n eher posve or negave feedback radng. I seems ha he radng sraeges of foregn nvesors have conrbued he sablzaon of economy by purchasng he shares ha have downward movng prces. Ths fndng s conrary of prevous researches ha arac aenon of he nsably role of foregn porfolo nvesmen. I could be undersood ha he foregn nvesors had no nend o leave he Turksh marke compleely on he conrary hey probably waned o benef from bear marke n he year of crss. The radng sraegy of domesc nvesors was no n he same drecon by keepng on sellng he shares n bear marke hey conrbued desablzaon n fnancal marke. A possble explanaon of hs sraegy of foregn nvesors s ha foregn nvesors may be more experenced and nformaonal advanaged relave o domesc nvesors. Snce foregn nvesors owned relavely bgger companes and almos he half of he shares n he marke a posve feedback sraegy could cause a more downward pressure on prces and her poson would be more dffcul. The basc resuls abou herdng are presened n Table 2. The resuls reveal ha he herdng measure s sascally dfferen from zero for domesc and nernaonal funds n oal perod and each sub perod. No only he foregn nvesors ha we have expeced bu also he domesc nvesors are engaged n herdng durng he oal perod and sub perods. The second oucome of hs analyss s a dfference n herdng endency among he nvesor groups. Foregn funds herd sgnfcanly more han domesc funds n all perods. The fndng suppors he prevous research ha ndcaes ha nernaonal funds would generally herd more aggressvely han domesc funds. A possble nerpreaon of hs fndng s ha foregn nvesors may be nformaonally advanaged relave o SAYIŞTAY DERGİSİ SAYI:

16 domesc nvesors. Ths resul s he conssen wh he resul n posve/negave feedback radng analyss dscussed n he prevous par. Table 2: Herdng Perods Foregn Invesors 1 Toal Perod ** Perod I ** Perod II ** Perod III ** Perod IV ** Sandard errors are n he parenheses. **ndcae sgnfcance a 1% *ndcae sgnfcance a 5% Domesc Invesors ** ** ** ** ** Dfference 3 = ** ** ** ** ** CONCLUSION Snce he early 1990s nernaonal deregulaons and assocaed capal flows from ndusral counres o developng counres appeared o be fuelng faser growh and developmen. However a seres fnancal crses sarng wh ndusral counres n Exchange Rae Mechansm ERM n 1992 and 1993 bu hen movng on n a sgnfcanly more vrulen form o developng counres wh he 1995 Mexcan crss he Asan crses of he Russan and Lan Amerca crses n Turkey and Argenna crses n 2001 had made clear ha nernaonal capal flows have rsks as well as benefs. Afer he fnancal lberalzaon a he end of 1980s n Turkey relavely mporan amoun of shor erm nernaonal capal flow nvesed n governmen borrowng nsrumens and ISE. Alhough hese funds had benefed o Turksh economy bu due o he unsusanable and nconssen macroeconomc polcy of Turkey hese funds mgh creae a rsk of 164 SAYIŞTAY DERGİSİ SAYI: 77

17 nsably by leavng he counry open o sudden reversals n capal flows. The crses n and 2001 mgh be he oucomes of lberalzaon n nernaonal nvesmens. The basc movaon for hs sudy s o nvesgae he role of nernaonal nvesors durng he fnancal crss n We analyzed he wo popular nvesmen radng sraeges of foregn porfolo nvesors ha are posve feedback radng and herdng n comparson wh he domesc nvesors n he crss perod. By analyzng he monhly sock posons of fnancal nsuons he nvesmen sraeges of foregn and domesc nvesors; we nvesgaed her nvesmen sraeges for he perod of December o December The fndngs revealed ha he foregn nvesors were engaged n negave feedback radng acvy ha was sablzed he fnancal marke durng he crss whereas domesc nvesors caused he nsably n markes by engagng n posve feedback radng. The resul s no supporng our expecaons and prevous sudes ha ndcae he desablzaon role of foregn fund n crss perods. The experence of nerpreaon of hs sraegy of foregn nvesors s ha foregn nvesors may be more experenced and nformaonal advanaged relave o domesc nvesors. The second oucome of he sudy was relaed wh he herdng behavor of nvesors. I s found ha he boh of nvesor groups have been parcpaed he herdng behavor n he marke no only n he peak perod of he crss bu also pos crss perods. However s found ha here was a hgh level of endency n foregn nvesor group o mmc each oher s radng. In oher words foregn funds herd sgnfcanly more han domesc funds n all perods. SAYIŞTAY DERGİSİ SAYI:

18 REFERENCES BANERJEE Abh. A Smple Model of Herd Behavor Quarerly Journal of Economcs 107 pp BIKHCHANDANI Sushl D. HIRSHLEIFER and I. WELCH. A Theory of Fads Fashon Cusom and Culural Change as Informaon Cascades Journal of Polcal Economy 100 pp BOHN H. L. L. TESAR. US. Equy Invesmen In Foregn Markes: Porfolo Rebalancng or Reurn Chasng? Amercan Economc Revew 86 pp BRENNAN M. J. and H. H. CAO. Inernaonal Porfolo Invesmen Flows Journal of Fnance Volume: 52 Issue: 5 Publshed: December BRENNAN M. J. and H. H. CAO. Inernaonal Porfolo Equy Flows Journal of Fnance Vol. 52 No. 4 December CHOE H. B. C. KHO and R. M. STULZ. Do Foregn Invesors Desablze Sock Markes? The Korean Experence n Journal of Fnancal Economcs Elsever vol. 542 pages DORNBUSCH and PARK. Fnancal Openng: Polcy Lessons for Korea Korea Insue of Fnance Inernaonal Cener For Economcs Growh FRANKEL Jeffrey A. and Sergo L. SCHMUKLER. Counry Fund Dscouns Asymmerc Informaon and he Mexcan Crss of 1994: Dd Local Resdens Turn Pessmsc Before Inernaonal Invesors? NBER Workng Paper No FRANKEL Jeffrey A. and Sergo L. SCHMUKLER. Counry Fund and Asymmerc Informaon Polcy Research Workng Paper No The World Bank FROOT Kenneh A. Paul G.J. O CONNELL and Mark S. SEASHOLES. The Porfolo Flows of Inernaonal Invesors NBER Workng Paper No The Forhcomng Journal of Fnancal Economcs FROOT Kenneh A. Paul G.J. O CONNELL and Mark S. SEASHOLES The Porfolo Flows of Inernaonal Invesors Journal of Fnancal Economcs FROOT K. and T. RAMADORAI. The Informaon Conen of Inernaonal Porfolo Flows NBER Workng Paper No: SAYIŞTAY DERGİSİ SAYI: 77

19 GRINBLATT Mark S. TITMAN and R. WERMERS. Momenum Invesmen Sraeges Porfolo Performance and Herdng: A Sudy of Muual Fund Behavor Amercan Economc Revew 85 pp KAMINSKY Gracela Rchard LYONS and Sergo SCHMUKLER. Managers Invesors and Crses: Muual Fund Sraeges n Emergng Markes NBER Workng Paper KIM W. and S. J. WEI. Offshore Invesmen Funds: Monsers n Emergng Markes? Journal of Developmen Economcs Volume LXVIII:1 June 2002: KIM W. and S. J. WEI. Foregn Porfolo Invesors Before and Durng a Crss Journal of Inernaonal Economcs Vol. 56 No. 1 pp LAKONISHOK J. A. SHLEIFER and R. W. VISHNY. The Impac of Insuonal Tradng on Sock Prces Journal of Fnancal Economcs Vol : LAKONISHOK J. A. SHLEIFER and R. W. VISHNY. Do Insuonal Invesors Desablze Sock Prces? Evdence on Herdng and Feedback Tradng NBER Workng Paper No: SCHARFSTEIN Davd S. and Jeremy C. STEIN. Herd Behavor and Invesmen Amercan Economc Revew : TESAR Lnda L. and Ingrd M. WERNER. Inernaonal Equy Transacons and US. Porfolo Choce n Jeff Frankel ed.: The Inernaonalzaon of Equy Markes Unversy of Chcago Press pp TESAR Lnda L. and Ingrd M. WERNER. US. Equy Invesmen n Emergng Sock Markes World Bank Economc Revew 9 No WYLİE Samuel. Tess of The Accuracy of Measures of Herdng Workng Paper YELDAN Ernç. Behnd he 2000/2001 Turksh Crss: Sably Credbly and Governance for Whom? SAYIŞTAY DERGİSİ SAYI:

20 168 SAYIŞTAY DERGİSİ SAYI: 77

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