Abstract

The results of this study suggest that the determinants of portfolio capital flows are those factors specific to Turkey such as real market return, exchange rate policy and credit rating, rather than those specific to the country where the investment originates. The main factor that attracts portfolio capital flows is the real rate of return in the current period. In contrast, past real returns do not have any explanatory power for portfolio capital flows. The, our results also indicate that the US bond rates do not have much impact on portfolio capital flows to Turkey. That is, a decrease in the US rates does not lead to a significant inflow of investment into the ISE.

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