An assessment of trading behavior and performance of foreign investors in Istanbul Stock Exchange

This study examines the trading behaviour of foreign investors and their return performance in Istanbul Stock Exchange. Since foreign investors are argued to be feedback traders in many markets, we focus on momentum and contrarian strategies. We find that past returns affect the investment decisions of foreign investors. Our evidence suggests that foreigners tend to buy stocks that have performed well in the past and sell stocks that have underperformed in the past which indicates that foreign investors are momentum traders. We also investigate whether foreign investors earn high returns by momentum trading. We did not find evidence of high returns by foreign investors. Our analysis suggests that they are uninformed momentum traders. Reprinted by permission of Vilnius University, Brno University of Technology, and University of Latvia