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The Impact Of Deregulation On Stock Market Efficiency

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  • Yen-Hsien Lee

Abstract

This study discusses the gradual shift of the Taiwanese government toward deregulation. Using the traditional variance ratio, nonparametric-based variance ratio tests and a rolling variance ratio test, this study examines the impact of liberalization on market efficiency in Taiwan. The results of the variance ratio test show that the deregulation of the activities of QFIIs is good for Taiwanese market efficiency during the first and third deregulations for foreign investors. Using a fixed-sized rolling window, this study shows that the policy of liberalization helps improve market efficiency, and disproves the weak form of the efficient markets hypothesis. The results of this study have practical implications for regulators wishing to attract international capital into their market in order to help improve market efficiency in emerging markets.

Suggested Citation

  • Yen-Hsien Lee, 2010. "The Impact Of Deregulation On Stock Market Efficiency," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(2), pages 165-176.
    • Handle: RePEc:ibf:ijbfre:v:4:y:2010:i:2:p:165-176
    as

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    More about this item

    Keywords

    variance ratio tests; rolling variance ratio test; foreign deregulation;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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