Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Foreign equity trading and average stock-return volatility
AU - Umutlu, Mehmet
AU - Akdeniz, Levent
AU - Altay-Salih, Aslihan
PY - 2013/9
Y1 - 2013/9
N2 - We examine whether there is a relationship between foreign equity trading and average total volatility, measured as the value-weighted average of stock-return variance in the Istanbul Stock Exchange. We employ foreign equity purchase and sale data to track changes in foreign equity trading, which not only enable us to capture effective foreign investor participation but also to observe the potential asymmetric effects of incoming and outgoing funds on the average total volatility. Consistent with the implications of the asymmetric information hypothesis, we find that net equity flow is positively associated with average total volatility. Furthermore, we show that net equity flow affects the average total volatility through the local and idiosyncratic volatilities, suggesting that foreign investors engage in the production of firm specific and market wide information.
AB - We examine whether there is a relationship between foreign equity trading and average total volatility, measured as the value-weighted average of stock-return variance in the Istanbul Stock Exchange. We employ foreign equity purchase and sale data to track changes in foreign equity trading, which not only enable us to capture effective foreign investor participation but also to observe the potential asymmetric effects of incoming and outgoing funds on the average total volatility. Consistent with the implications of the asymmetric information hypothesis, we find that net equity flow is positively associated with average total volatility. Furthermore, we show that net equity flow affects the average total volatility through the local and idiosyncratic volatilities, suggesting that foreign investors engage in the production of firm specific and market wide information.
U2 - 10.1111/twec.12011
DO - 10.1111/twec.12011
M3 - Journal article
VL - 36
SP - 1209
EP - 1228
JO - The World Economy
JF - The World Economy
SN - 0378-5920
IS - 9
ER -