We ask whether foreign equity ownership affects the stability of information signals that are absorbed into prices in an emerging economy. We address both 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 isolates information effects, correcting for liquidity and volume differences across stock series experiencing different degrees of foreign ownership. We find that foreign ownership does not affect the volatility of information 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, but also includes an independently identifiable increase in the volatility of information.
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Paper provided by Duke University, Department of Economics in its series Working Papers with number
97-08.
Length: Date of creation: 1997 Date of revision: Handle: RePEc:duk:dukeec:97-08
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Find related papers by JEL classification: C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
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