TY - UNPB
T1 - The Degree of Financial Liberalization and Aggregated Stock-return Volatility in Emerging Markets
AU - Umutlu, M.
AU - Akdeniz, L.
AU - Salih, A.A.
N1 - Subsequently published in Journal of Banking & Finance, 2010
Pagination: 58
PY - 2009
Y1 - 2009
N2 - In this study, we address whether the degree of financial liberalization affects the aggregated total volatility of stock returns by considering the time-varying nature of financial liberalization. We also explore channels through which the degree of financial liberalization impacts aggregated total volatility. We document a negative relation to the degree of financial liberalization after controlling for size, liquidity, country, and crisis effects, especially for small and medium-sized markets. Moreover, the degree of financial liberalization transmits its negative impact on aggregated total volatility through aggregated idiosyncratic and local volatilities. Overall, our results provide evidence in favor of the view that the broadening of the investor base due to the increasing degree of financial liberalization causes a reduction in the total volatility of stock returns.
AB - In this study, we address whether the degree of financial liberalization affects the aggregated total volatility of stock returns by considering the time-varying nature of financial liberalization. We also explore channels through which the degree of financial liberalization impacts aggregated total volatility. We document a negative relation to the degree of financial liberalization after controlling for size, liquidity, country, and crisis effects, especially for small and medium-sized markets. Moreover, the degree of financial liberalization transmits its negative impact on aggregated total volatility through aggregated idiosyncratic and local volatilities. Overall, our results provide evidence in favor of the view that the broadening of the investor base due to the increasing degree of financial liberalization causes a reduction in the total volatility of stock returns.
KW - return volatility
KW - financial liberalization
KW - market integration
KW - volatility decomposition
KW - emerging markets
M3 - Discussion paper
VL - 2009-67
T3 - CentER Discussion Paper
BT - The Degree of Financial Liberalization and Aggregated Stock-return Volatility in Emerging Markets
PB - Finance
CY - Tilburg
ER -