The Impact of Stock Market Liberalization on the Efficiency of Emerging Stock Markets PDF Download
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Author: Sonali Jain-Chandra
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
During the last two decades, many emerging markets have embarked on a course of economic reform, including stock market liberalization. This paper addresses the question of whether these markets have become more informationally efficient in the years following liberalization. We find that emerging stock markets become more efficient following liberalization. Additionally, using a panel data set on sixteen liberalizing countries and various measures of liquidity, we show that liberalization leads to enhanced liquidity after controlling for size and other factors. Furthermore, this paper addresses the question whether the increase in efficiency could be the result of an increase in liquidity. This paper concludes that an increase in liquidity leads to a decrease in market inefficiency. This confirms the intuition that enhanced liquidity might render emerging stock markets more efficient.
Author: Sonali Jain-Chandra
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
During the last two decades, many emerging markets have embarked on a course of economic reform, including stock market liberalization. This paper addresses the question of whether these markets have become more informationally efficient in the years following liberalization. We find that emerging stock markets become more efficient following liberalization. Additionally, using a panel data set on sixteen liberalizing countries and various measures of liquidity, we show that liberalization leads to enhanced liquidity after controlling for size and other factors. Furthermore, this paper addresses the question whether the increase in efficiency could be the result of an increase in liquidity. This paper concludes that an increase in liquidity leads to a decrease in market inefficiency. This confirms the intuition that enhanced liquidity might render emerging stock markets more efficient.
Author: Mohamed El Hedi Arouri
Publisher: Springer Science & Business Media
ISBN: 3790823899
Category : Business & Economics
Languages : en
Pages : 214
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Book Description
Emerging markets have received a particular attention of academic researchers and practitioners since they decided to open their domestic capital markets to foreign participants about three decades ago. At the same time, we remark that theoretical and empirical research in emerging stock markets has been particularly challenged by their fast changes in nature and size under the effects of financial liberalization and reforms. This evolving feature has particularly led to a commensurate increase in sophistication of modeling techniques used for understanding financial markets. In this spirit, the book aims at providing the audience a comprehensive understanding of emerging stock markets in various aspects using modern financial econometric methods. It addresses the empirical techniques needed by economic agents to analyze the dynamics of these markets and illustrates how they can be applied to the actual data. On the other hand, it presents and discusses new research findings and their implications.
Author: Duc Khuong Nguyen
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
On testing the impact of stock market liberalization on weak form market efficiency in emerging market countries, previous studies often provide divergent results. This paper revisits this empirical literature by using a time-varying parameter model which enables us to handle the gradual effects induced by stock market liberalization on informational efficiency. The model also corrects for both the serial correlation in return structure and volatility risk premium of local markets. First, we show that while some markets tend to converge to more efficient markets in the aftermath of stock market liberalization, others moved away from efficient state. For markets which were already efficient before financial liberalization implementations, the informational efficiency appears to be more apparent in recent years. Second, although we document significant effects of stock market liberalization on efficiency after controlling for economic and political perspectives, the direction of effects remains inconclusive because empirical results tend to be country-specific. Finally, it is worth noting that conditional stock market volatility has no significant impact on the expected returns.
Author: Mohamed El Hedi Arouri
Publisher:
ISBN: 9783790823905
Category :
Languages : en
Pages : 224
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Book Description
Author: Sang W. Kim
Publisher:
ISBN:
Category : International economic relations
Languages : en
Pages : 38
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Book Description
Author: Matthew R. Morey
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The efficient markets hypothesis in finance suggests that as equity markets are liberalized and made more open to the public, equity prices should reflect the increased availability of information and be more efficiently priced. In this paper, we examine whether emerging market equity prices have become more efficient after financial liberalization. Using two sets of financial liberalization dates, a battery of econometric tests, and data from sixteen countries and three composite portfolios, we find that in spite of theory suggesting the opposite, liberalization does not seem to have improved the efficiency of emerging markets. In fact, most of our statistical tests indicate that the markets were already efficient before the actual liberalization.
Author: Robert Pardy
Publisher:
ISBN:
Category : Developing countries
Languages : en
Pages : 48
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Book Description
Developing a securities market is a long-term, multifaceted task that requires extensive institutional development, for which there are few shortcuts. And many of the changes required have both positive and negative ramifications in other parts of the financial system and the economy.
Author: Peter Blair Henry
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 64
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Book Description
"Contrary to the predictions of standard economic theory, capital market liberalization has been a mixed blessing for many countries. Liberalization of debt inflows exposes economies to the risk of crises stemming from sudden changes in investor sentiment. Equity market liberalizations, on the other hand, have promoted growth in almost every liberalizing country. Yet equity market liberalizations have not had as strong an effect as might be expected. To convince outsiders to invest, countries must put in place laws and supporting institutions to protect the rights of minority shareholders. Countries with such protections tend to have larger, more efficient, and more stable stock markets than those that do not"--NBER website
Author: Kian-Ping Lim
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
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Book Description
Basu and Morey [Trade opening and the behavior of emerging stock market prices, Journal of Economic Integration 20(1), 2005, 68-92] develop a theoretical model that predicts financial opening without trade reform does not lead to higher weak-form efficiency. The present paper brings their proposition to the data of 23 emerging stock markets. In general, the key results from fixed effects panel regressions support their prediction that trade liberalization, rather than financial openness, matters the most for informational efficiency. However, our empirical findings are not consistent with their postulated mechanisms through which it occurs. Firstly, it is not the official removal of non-tariff barriers that leads to higher stock price informativeness. What really matters for stock market investors is the actual level of economy integration in the reforming country with the world. Secondly, it is not the actual gain in productive efficiency in the real sector that leads to higher weak-form market efficiency. Instead, stock prices incorporate information about the expected gain from trade openness, such as higher future profitability or greater future productivity growth.
Author: Hyunchul Chung
Publisher:
ISBN:
Category : Capital costs
Languages : en
Pages : 262
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Book Description
"Our test results using country indices show statistically and economically significant revaluation effects, and increases in the cost of capital. While the stock market volatility increases, its correlation with world market return does not change after stock market liberalization. More important than these market-level findings, we report significantly different impacts of stock market liberalization, based on firm size, which is used as a proxy for foreign investors' demand. Large firms tend to exhibit large revaluation effects, insignificant change in the cost of capital, small increases in volatility, and increases in correlation with the world market from liberalization. Small firms show small revaluation effects, increases in the cost of capital, large increases in volatility and decreases in correlation with world market returns after liberalization. Our results have important implications for international investors seeking to manage their global exposure as well as for policy makers considering capital market liberalization." --
