Özet:

Although foreign direct investment (FDI) is the dominant form of capital inflow in developing countries, FDI has been replaced by foreign portfolio investments (FPI) in recent years. FPI is the buy and sale transactions carried out by foreign investors directly or indirectly in the stock exchanges of other countries. There are various studies in the literature to examine the factors that have a significant impact on the stock market performance of companies. In these studies, economic variables such as GDP, Interest rate, Exchange rate and inflation are taken into account. However, studies have been conducted that show that FPI has a significant effect on stock prices. It is observed that the flow of international capital to stock markets tends to increase the depth and liquidity of domestic markets, especially in developing economies where stock markets are relatively illiquid.In this study, the relationship between foreign portfolio investments and financial development has been analyzed based on the financial data of 52 countries, regardless of their level of development. For this purpose, Pedroni and Kao cointegration analyzes and Dimitrescu and Hurlin causality analyzes were carried out. As a result of the study, a long-term cointegration relationship between the series has been determined. The results of the study support the hypothesis that there is an important relationship between the financial development levels of the countries and foreign portfolio investments. Based on the results of the study, it can also be concluded that financial integration supports financial development in the long run. However, no causality relationship was found between variables.

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