Foreign investment,regulation and price volatility in South-east Asian stock markets |
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| Institution: | 1. Department of Business Administration, Da-Yeh University, 168, University Rd., Dacun, Changhua 51591, Taiwan;2. Department of Finance, Da-Yeh University, Taiwan;3. National Chung-Hsing University, Taiwan;4. Asia University, Taiwan;1. School of Accounting, Guangdong University of Finance & Economics, Guangzhou, Guangdong 510320, People''s Republic of China;2. School of Business, Western Sydney University, Parramatta, NSW 2150, Australia;3. Newcastle Business School, University of Newcastle, 55 Elizabeth Street, Sydney, NSW 2000, Australia;4. School of Business Administration, South China University of Technology, Guangdong 510000, People''s Republic of China;1. Korea Advanced Institute of Science and Technology, College of Business, Graduate School of Finance and Accounting, South Korea;2. Seoul Women''s University, South Korea |
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| Abstract: | This paper examines the extent to which changes in the openness of three South-east Asian Stock Markets to foreign investors impact on the volatility of prices in those markets. Regulatory authorities have been cautious about the opening up of markets to foreign investors, fearing that increased liberalisation may lead to increased price volatility, which, in turn, may have a detrimental effect on the operation of the market and the wider economy. Using an asymmetric GARCH model, it is shown that while greater liberalisation has changed the nature of price volatility in the markets, there has not been a destabilising impact. Rather, asymmetric responses of volatility to news have reduced post-liberalisation, suggesting that informed traders are playing a greater role in the markets, with the impact of noise traders being reduced. |
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