The Impact of Foreign Equity Ownership on Emerging Market Share Price Volatility
AbstractWe ask whether foreign equity ownership affects the stability of share prices in an emerging economy. We address the effect of ownership restrictions exogenously imposed on stock ownership and the impact of introducing or widening foreign ownership through cross-listing. A methodology for variance ratio analysis is introduced that corrects for liquidity and volume differences across stock series experiencing different degrees of foreign ownership. We find that foreign ownership does not affect volatility in the absence of cross-listing. Foreign ownership introduced or accompanied by cross-listing of a stock series raises the variance of returns. This effect is found to operate in part through increases in volume traded on the domestic market following the listing, and through an identifiable increase in the volatility of information net of volume effects. Copyright 2000 by Blackwell Publishers Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal International Finance.
Volume (Year): 3 (2000)
Issue (Month): 1 (April)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271
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- Domowitz, Ian & Glen, Jack & Madhavan, Ananth, 2001.
"Liquidity, Volatility and Equity Trading Costs across Countries and over Time,"
Wiley Blackwell, vol. 4(2), pages 221-55, Summer.
- Ian Domowitz & Jack Glen & Ananth Madhavan, 2000. "Liquidity, Volatility, and Equity Trading Costs Across Countries and Over Time," William Davidson Institute Working Papers Series 322, William Davidson Institute at the University of Michigan.
- Asli Bayar & Zeynep Onder, 2005. "Liquidity and price volatility of cross-listed French stocks," Applied Financial Economics, Taylor & Francis Journals, vol. 15(15), pages 1079-1094.
- Bley, Jorg & Saad, Mohsen, 2011. "The effect of financial liberalization on stock-return volatility in GCC markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(5), pages 662-685.
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