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Enhancing the efficiency of securities markets in East Asia

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  • Ghosh, Swati
  • Revilla, Ernesto

Abstract

The authors explore the relative efficiency of stock markets across countries using newly available data on transactions costs and the quality of the informational environment of stock markets. These new measures are constructed from firm-level stock returns in a panel of 60 countries for the period 2000-04. The authors then develop a framework to understand the linkages between efficiency, liquidity, and their determinants. To give empirical content to the framework, they study the determinants of transactions costs and the quality of the informational environment. They find that some institutional arrangements-such as the availability of stock lending and short selling-and the openness of markets are associated with lower transactions costs. The authors also find that, although disclosure rules for directors and officers of listed firms are essential, the ability of shareholders to seek redress is more conducive to a better informational environment in stock markets. This in turn serves as the basis for the policy framework and recommendations for the East Asian region. In particular, the region needs to continue to strengthen the implementation and enforcement of corporate governance, to further enhance the market and institutional infrastructure, and focus on policy measures to foster a larger and more diversified investor base to continue to see gains in the efficiency of stock markets.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4129.

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Date of creation: 01 Feb 2007
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Handle: RePEc:wbk:wbrwps:4129

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Keywords: Markets and Market Access; Economic Theory&Research; Financial Intermediation; Access to Markets; Financial Crisis Management&Restructuring;

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  1. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, Elsevier, vol. 88(3), pages 430-465, June.
  2. Arturo Bris & William Goetzmann & Ning Zhu, 2004. "Short-Sales in Global Perspective," Yale School of Management Working Papers, Yale School of Management ysm453, Yale School of Management, revised 01 Sep 2009.
  3. Karl W. Steininger, 2002. "Transport, Access and Economic Growth," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 3(2), pages 75-91, April.
  4. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2003. "What Works in Securities Law?," NBER Working Papers 9882, National Bureau of Economic Research, Inc.
  5. Schwert, G. William, 2003. "Anomalies and market efficiency," Handbook of the Economics of Finance, Elsevier, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 15, pages 939-974 Elsevier.
  6. Charles Frederick Kramer & Catriona Purfield & Hiroko Oura & Andreas Jobst, 2006. "Asian Equity Markets," IMF Working Papers, International Monetary Fund 06/266, International Monetary Fund.
  7. Randall Morck & Bernard Yeung & Wayne Wu, 1999. "The Information Content of Stock Markets: Why do Emerging Markets have Synchronous Stock Price Movements?," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 44, William Davidson Institute at the University of Michigan.
  8. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, American Finance Association, vol. 25(2), pages 383-417, May.
  9. Lesmond, David A., 2005. "Liquidity of emerging markets," Journal of Financial Economics, Elsevier, Elsevier, vol. 77(2), pages 411-452, August.
  10. Hess, David & Impavido, Gregorio, 2003. "Governance of public pension funds : lessons from corporate governance and international evidence," Policy Research Working Paper Series 3110, The World Bank.
  11. Augusto de la Torre & Sergio Schmukler, 2005. "Whither Latin American Capital Markets?," World Bank Other Operational Studies 10336, The World Bank.
  12. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, American Finance Association, vol. 46(5), pages 1575-617, December.
  13. Lesmond, David A & Ogden, Joseph P & Trzcinka, Charles A, 1999. "A New Estimate of Transaction Costs," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 12(5), pages 1113-41.
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Cited by:
  1. Joyce Hsieh & Chien-Chung Nieh, 2010. "An overview of Asian equity markets," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(2), pages 19-51, November.
  2. Lagoarde-Segot, Thomas, 2009. "Financial reforms and time-varying microstructures in emerging equity markets," Journal of Banking & Finance, Elsevier, Elsevier, vol. 33(10), pages 1755-1769, October.
  3. Tao Sun & L. Effie Psalida, 2009. "Spillovers to Emerging Equity Markets," IMF Working Papers, International Monetary Fund 09/111, International Monetary Fund.

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