How Consumer Confidence Index Affects Foreign Investors' Portfolio and Equity Security Investments: A Research on Turkey

In this study, it has been investigated whether the consumer confidence index, which is an indicator of investor sensitivity, has an effect on the portfolio and equity security investments of foreign investors. Analyses are made using the consumer confidence index and the quarterly data of foreigners' portfolio and equity security investments in Turkey between 2012 and 2020. Dual VAR models are created and Granger causality analyses are performed. The results show there is Granger causality from the consumer confidence index to the portfolio investments made by foreign residents. This causality is also determined in the direction to equity security investments. Regression analyses indicate that the causality relationships have a positive sign. It is concluded that an increase in the consumer confidence index may lead to an increase in the domestic portfolio and equity security investments of foreign residents or, on the contrary, it will decrease. These results could be interpreted as the consumer confidence index might be used as a measure of investor sentiment in estimating the amount of portfolio and equity security investments of foreign investors.