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Segmentation, business environment and global informational efficiency of emerging financial markets

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  • Boamah, Nicholas Addai

Abstract

The study investigates global information diffusion into emerging markets (EM) security prices. It explores the role of financial market segmentation and the business environment in describing global information production by emerging markets securities. Using Kalman smoother and variance decomposition techniques, the study estimates the global informational efficiency of emerging markets securities. It finds that global informational efficiency is time varying. Similarly, increased market segmentation, strength of legal rights, and rising ADR cost minimise global information diffusion into emerging markets security prices. Additionally, improved business start-up procedures, framework for resolving insolvency and financial market depth facilitate the incorporation of global information into security prices. The evidence shows the need for emerging markets to implement policies geared towards improving the global integration of their financial markets, enhancing the business environment, and developing cost effective and adequate framework for resolving insolvency and business related disputes. This is necessary in ensuring the diffusion of global news to emerging market security prices and consequently attracts investments into emerging economies.

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  • Boamah, Nicholas Addai, 2022. "Segmentation, business environment and global informational efficiency of emerging financial markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 52-60.
    • Handle: RePEc:eee:quaeco:v:84:y:2022:i:c:p:52-60
    DOI: 10.1016/j.qref.2022.01.010
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    More about this item

    Keywords

    Information efficiency; Financial segmentation; Quality of business environment; Dispute resolution;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F15 - International Economics - - Trade - - - Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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