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

This study examines the causal relationship among volatility, liquidity, and foreign stock ownership in the Borsa Istanbul stock market, both frm and market level. The Granger causality tests, along with the Toda and Yamamoto (J Econometr 66:225– 250, 1995) method at the frm level and the Dumitrescu and Hurlin (Econ Model 29:1450–1460, 2012) modifcation 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 confrm the causal relationship from foreign ownership to volatility.