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http://ssrn.com/abstract=965918
 
 

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Do Foreigners Facilitate Information Transmission in Emerging Markets?


Kee-Hong Bae


York University - Schulich School of Business

Arzu Ozoguz


University of Texas at Dallas - Naveen Jindal School of Management

Hongping Tan


Schulich School of Business, York University

Tony S. Wirjanto


University of Waterloo, School of Accounting & Finance and Department of Statistics & Actuarial Science

July 14, 2011

Journal of Financial Economics. Forthcoming

Abstract:     
Using the degree of accessibility of foreign investors to emerging stock markets, or investibility, as a proxy for the extent of foreign investments, we assess whether investibility has a significant influence on the diffusion of global market information across stocks in emerging markets. We show that greater investibility reduces price delay to global market information where the price delay is measured as the proportion of stock returns explained by the lagged world market returns in the regression of stock returns on contemporaneous and lagged world and local market returns. We also find that returns of highly investible stocks lead those of non-investible stocks because they incorporate global information more quickly. These results are consistent with the idea that financial liberalization in the form of greater investibility yields informationally more efficient stock prices in emerging markets.

Number of Pages in PDF File: 47

Keywords: lead-lag cross-autocorrelations, information diffusion, price delay, foreign investment, emerging markets

JEL Classification: G12, G14, G15

working papers series


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Date posted: February 27, 2007 ; Last revised: March 14, 2012

Suggested Citation

Bae, Kee-Hong and Ozoguz, Arzu and Tan, Hongping and Wirjanto, Tony S., Do Foreigners Facilitate Information Transmission in Emerging Markets? (July 14, 2011). Journal of Financial Economics. Forthcoming. Available at SSRN: http://ssrn.com/abstract=965918 or http://dx.doi.org/10.2139/ssrn.965918

Contact Information

Kee-Hong Bae (Contact Author)
York University - Schulich School of Business ( email )
4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-2100 ext) 20248 (Phone)
416-736-5687 (Fax)
Arzu Ozoguz
University of Texas at Dallas - Naveen Jindal School of Management ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
Hongping Tan
Schulich School of Business, York University ( email )
4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
Tony S. Wirjanto
University of Waterloo, School of Accounting & Finance and Department of Statistics & Actuarial Science ( email )
200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)
HOME PAGE: http://ttps://artsonline.uwaterloo.ca/safprofile/view_profile.php?id=45
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