Financial liberalization and stock market efficiency: an empirical examination of nine emerging market countries |
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| Affiliation: | 1. Department of Economics, University of California, Irvine, 3151 Social Science Plaza, Irvine, CA 92697-5100, USA;2. Department of Economics, Wright Hall 12, Smith College, Northampton, MA 01063, USA;1. CSIR – National Geophysical Research Institute, Hyderabad, India;2. Geodynamic Department, National Cartographic Centre, Meraj Av., Azadi Square, P.O. Box 13185-1684, Tehran, Iran;3. Department of Earth and Atmospheric Sciences, NIT Rourkela, Rourkela, India;4. Department of Applied Geology, Dr. Hari Singh Gour University, Sagar, India;5. National Centre for Seismology, Ministry of Earth Sciences, New Delhi, India;1. Department of Earth Sciences, Faculty of Natural Sciences, University of Tabriz, 5166616471, Tabriz, Iran;2. Department of Renewable Energy, Ministry of Energy, Tehran, Iran;3. Geochemistry & Hydrogeology, Department of Geosciences, University of Bremen, Germany;1. Laboratory of Seismology and Physics of Earth’s Interior, School of Earth and Space Sciences, University of Science and Technology of China, Hefei, Anhui 230026, China;2. National Geophysical Observatory at Mengcheng, Anhui, China;1. Department of Earth Sciences, University of Tabriz, PO Box 5166614776, Tabriz, Iran;2. Department of Geology, Tarbiat Modares University, PO Box 14115-175, Tehran, Iran;3. Geological Survey of Iran, PO Box 5167733551, Tabriz, Iran |
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| Abstract: | 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 nine different countries, 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 prior to the actual liberalization. |
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