Causality Nexus Between Volatility, Liquidity and Foreign Ownership: Evidence from Borsa Istanbul

BENTÜRK M.

Journal of Quantitative Economics, 2025 (ESCI) identifier

  • Publication Type: Article / Article
  • Publication Date: 2025
  • Doi Number: 10.1007/s40953-025-00446-w
  • Journal Name: Journal of Quantitative Economics
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus, EconLit
  • Keywords: Conditional volatility, Foreign ownership, GMM, Granger causality, Liquidity, Realized volatility
  • Istanbul Gelisim University Affiliated: Yes

Abstract

This study examines the causal relationship among volatility, liquidity, and foreign stock ownership in the Borsa Istanbul stock market, both firm and market level. The Granger causality tests, along with the Toda and Yamamoto (J Econometr 66:225–250, 1995) method at the firm level and the Dumitrescu and Hurlin (Econ Model 29:1450–1460, 2012) modification at the market level, show the existence of a bidirectional causal relationship between volatility and liquidity, which is also validated with the volatility and liquidity estimations in the GMM model. Dumitrescu and Hurlin's (Econ Model 29:1450–1460, 2012) causality tests indicate a causal relationship from foreign ownership to both volatility and liquidity, whereas the GMM estimates only confirm the causal relationship from foreign ownership to volatility.