THE EFFECT OF COUNTRY RISK ON THE FOREIGN PORTFOLIO INVESTMENT

The aim of this study is to investigate the effect of country risk including economic, financial and political risk on foreign portfolio investment. in the study, covering the period from january 1997 to december 2010, foreign portfolio investments (fpi), economic, financial and politic risk premiums are used. johansen-jeselius co-integration tests results show that there is a long run relationship between fpi with financial risk, politic risk and economic risk, however; granger causality tests show a causality from financial risk to fpi and from fpi to politic risk, and causality is not available between fpi and economic risk. estimation of regression results show that financial risk affects fpi positively, political risk affects fpi negatively and economic risk does not affect fpi statistically in a meaningful way.