Political Turmoil and the Impact of Foreign Orders on Equity Prices

Posted: 3 Feb 2020

See all articles by Murat Tiniç

Murat Tiniç

Kadir Has University

Tanseli Savaser

Vassar College - Department of Economics

Date Written: January 8, 2020

Abstract

This paper examines whether foreign investors possess an information advantage over local investors in the Turkish stock market between 2007 and 2015. We find that foreign investors have an information advantage in 24 stocks, corresponding to seven percent of the sample firms. Foreign investors’ information advantage tends to prevail primarily during a period of political instability, which started with the Gezi Park protests in June 2013. The adverse selection component of the foreign trade spreads, which reflects a permanent change in stock prices, rises significantly after June 2013, by 66 bps. Our results suggest that domestic investors’ funding constraints, which limit their ability to impart their information on stock prices, may give foreign investors a relative information advantage during periods of political turmoil.

Keywords: Information Asymmetry, Market Microstructure, Emerging Markets, Political Turmoil

JEL Classification: G14

Suggested Citation

Tiniç, Murat and Savaser, Tanseli, Political Turmoil and the Impact of Foreign Orders on Equity Prices (January 8, 2020). Journal of International Financial Markets, Institutions and Money, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3515743

Murat Tiniç (Contact Author)

Kadir Has University ( email )

Istanbul
Turkey

Tanseli Savaser

Vassar College - Department of Economics ( email )

124 Raymond Avenue
Poughkeepsie, NY 12604
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
71
PlumX Metrics