Reaction of foreign investors to natural disasters in the stock market: A study with least squares and wavelet coherence analysis on the Kahramanmaraş earthquakes

This study examines the impact of natural disasters and sensitivity to disasters on foreign investors within the scope of stock market investments, focusing on the Kahramanmaraş earthquakes. Analyses were conducted from 11.09.2020 to 31.01.2025 using ordinary least squares regression and wavelet coherence (WTC) analyses. The OLS results showed that stock market returns, foreigners’ risk tendency, and credit default swaps (CDS) premiums had significant effects on the net changes in foreign investor portfolios. However, after the Kahramanmaraş earthquakes, the earthquakes did not change these effects. The WTC analysis found that the net change in foreign investor portfolios and the variables examined over a range of time periods and dates, including the Kahramanmaraş earthquakes, were significantly linked to each other. In these relationships, short-term causal effects emerged between sensitivity to earthquakes, returns, and risk tendencies, whereas the returns causal effects continued over a longer period. In terms of the reaction to returns, it was observed that foreign investors’ behaviors in Borsa İstanbul changed relative to before the earthquakes. However, earthquakes did not have an effect on the negative effects on CDS premiums.