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Emerging Stock Market Liberalisation, Total Returns, and Real Effects: Some Sensitivity Analyses

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J Benson Durham

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Abstract

Recent studies report that equity market liberalisation positively correlates with total return, which in turn purportedly increases private investment growth. While the finding on reform and performance is generally robust to alternative perspectives on capital account liberalisation that emphasise over-heating and volatility, this crucial first link in the causal chain is not wholly robust empirically. For example, previous findings are very sensitive to alternative definitions of precise liberalisation event dates. Also, spatial variance seems to drive significant results in panel regressions, which is problematic for interpreting the particular path from equity prices to private investment. Finally, existing studies do not satisfactorily control for other determinants of returns, and extreme bound analysis (EBA) suggests that liberalisation is spurious.

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Paper provided by Queen Elizabeth House, University of Oxford in its series QEH Working Papers with number qehwps51.

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Handle: RePEc:qeh:qehwps:qehwps51

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. J Benson Durham, . "Time-Series Econometrics of the Real and Financial Effects of Capital Flows: Selected Cases in Africa and Southern Asia," QEH Working Papers qehwps56, Queen Elizabeth House, University of Oxford. [Downloadable!]
  2. Demetriades, Panicos O. & Andrianova, Svetlana, 2005. "Sources and Effectiveness of Financial Development: What We Know and What We Need to Know," Working Papers RP2005/76, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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