Emerging Stock Market Liberalisation, Total Returns, and Real Effects: Some Sensitivity Analyses

"Emerging Stock Market Liberalisation, Total Returns, and Real Effects: Some Sensitivity Analyses," Oxford Department for International Development Working Paper No. 51

Posted: 19 Jun 2019

Date Written: 2000

Abstract

Recent studies report that equity market liberalisation positively correlates with total return, which in turn purportedly increases private investment growth. While the finding on reform and performance is generally robust to alternative perspectives on capital account liberalisation that emphasise over-heating and volatility, this crucial first link in the causal chain is not wholly robust empirically. For example, previous findings are very sensitive to alternative definitions of precise liberalisation event dates. Also, spatial variance seems to drive significant results in panel regressions, which is problematic for interpreting the particular path from equity prices to private investment. Finally, existing studies do not satisfactorily control for other determinants of returns, and extreme bound analysis (EBA) suggests that liberalisation is spurious.

Suggested Citation

Durham, J. Benson, Emerging Stock Market Liberalisation, Total Returns, and Real Effects: Some Sensitivity Analyses (2000). "Emerging Stock Market Liberalisation, Total Returns, and Real Effects: Some Sensitivity Analyses," Oxford Department for International Development Working Paper No. 51. Available at SSRN: https://ssrn.com/abstract=3402608

J. Benson Durham (Contact Author)

Cornerstone Macro LLC ( email )

1330 Sixth Avenue, 5th Floor
New York, NY 10019
United States

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