Download this Paper Open PDF in Browser

Stock Market Liberalization and Return Volatility: Evidence from the Emerging Market of Sri Lanka

29 Pages Posted: 6 Nov 2009 Last revised: 9 Nov 2009

Fazeel Mohamed Jaleel

Macquarie University

Lalith P. Samarakoon

University of St. Thomas

Date Written: December 1, 2009

Abstract

This study examines the impact of liberalization of the Sri Lankan stock market on return volatility. We specify GARCH and TGARCH models of volatility, and estimate them using 16 years of weekly returns for the period from 1985 to 2000. The results show that liberalization of the market to foreign investors significantly increased the return volatility in the Colombo Stock Exchange. Both conditional and unconditional volatility measures are the highest in the liberalization period. Negative return shocks lead to lower volatility suggesting that there is no leverage effect, and this appears to reflect the very low levels of leverage used by Sri Lankan companies.

Keywords: liberalization, volatility, GARCH and TGARCH models, emerging markets, Sri Lanka

JEL Classification: F37, G12, G15

Suggested Citation

Jaleel, Fazeel Mohamed and Samarakoon, Lalith P., Stock Market Liberalization and Return Volatility: Evidence from the Emerging Market of Sri Lanka (December 1, 2009). Journal of Multinational Financial Management, Vol. 19, No. 5, 2009. Available at SSRN: https://ssrn.com/abstract=1501125

Fazeel Mohamed Jaleel

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Lalith P. Samarakoon (Contact Author)

University of St. Thomas ( email )

2115 Summit Ave
St. Paul, MN 55105
United States

HOME PAGE: http://www.stthomas.edu/business/faculty/directory/Samarakoon_Lalith.html

Paper statistics

Downloads
209
Rank
122,305
Abstract Views
870