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Financial Liberalisation and Stock Market Volatility: The Case of Indonesia

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Author Info
Gregory James () (Dept of Economics, Loughborough University)
Michail Karoglou () (Business School, Newcastle University)

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Abstract

This paper examines the relationship between financial liberalisation and stock market volatility in Indonesia. By looking at the time series properties of the Jakarta Composite Index (JCI) we identify breaks in stock market volatility which coincide with the timing of major policy events. Our main findings are (i) a significant decrease in volatility after the "official" opening of the stock market to foreign participation; (ii) a significant increase in volatility in the year before market opening following reforms that eased entry requirements and the issuance of brokerage licenses; and (iii) a significant increase in volatility at the time of the Asian crisis followed by a significant decrease in the second and sixth years after the crisis.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/JamesKaroglou0909.pdf
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Publisher Info
Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2009_11.

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Date of creation: Sep 2009
Date of revision: Sep 2009
Handle: RePEc:lbo:lbowps:2009_11

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Related research
Keywords: financial liberalisation; stock market volatility; Indonesia; Asian crisis.;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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