Foreign Equity Flows and the 'Size Bias': Evidence from an Emerging Stock Market

Posted: 10 Feb 2020

Date Written: 2011

Abstract

This paper examines foreign investors' equity-level transactions in an emerging stock market, the Istanbul Stock Exchange, for the period 1997–2008 to derive insights into the debate on information asymmetries between domestic and foreign investors and the home bias puzzle. The analysis suggests two important findings. First, foreign investors do not consider the market portfolio of domestic securities as predicted by standard theories of international portfolio diversification. Second, the firm's size and the expected return are central to explain foreign investors' equity trades. The results are consistent with models based upon the hypothesis of differential information between foreign and domestic investors.

Keywords: information asymmetries, foreign investors, portfolio flows, home bias

JEL Classification: G11, G14

Suggested Citation

Diyarbakirlioglu, Erkin, Foreign Equity Flows and the 'Size Bias': Evidence from an Emerging Stock Market (2011). Emerging Markets Review, Vol. 12, No. 4, 2011. Available at SSRN: https://ssrn.com/abstract=3520562

Erkin Diyarbakirlioglu (Contact Author)

IAE Gustave Eiffel ( email )

Place de la Porte des Champs
Créteil, 94010
France

HOME PAGE: http://www.iae-eiffel.fr/

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