The Journal of Business · 2000 · 547 citations · 47 references
BusinessEconomicsFinanceEconometricsFinancial EconomicsFinancial MarketsAsset Pricing EmpiricsFinancial RiskForeign Exchange MarketsMarket RiskStock MarketsVolatility ModelingExchange Rate Volatility EffectsRandom Walk HypothesisStock Market Returns
The article explores the benefits and risks of opening stock markets in emerging economies. The authors estimate changes in the level and volatility of stock returns, inflation, and exchange rates around market openings. Stock returns rise immediately after market openings without a rise in volatility, markets become more efficient, and inflation and exchange‑rate volatility decline, with no evidence of inflation increases or currency appreciation. Copyright 2000 by University of Chicago Press.
This article is an exploratory examination of the benefits and risks associated with opening of stock markets. Specifically, we estimate changes in the level and volatility of stock returns, inflation, and exchange rates around market openings. We find that stock returns increase immediately after market opening without a concomitant increase in volatility. Stock markets become more efficient as determined by testing the random walk hypothesis. We find no evidence of an increase in inflation or an appreciation of exchange rates. If anything, inflation seems to decrease after market opening as do the volatility of inflation and volatility of exchange rates. Copyright 2000 by University of Chicago Press.
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