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Foreign Speculators and Emerging Equity Markets

Author

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  • Geert Bekaert
  • Campbell R. Harvey

Abstract

We propose a cross‐sectional time‐series model to assess the impact of market liberalizations in emerging equity markets on the cost of capital, volatility, beta, and correlation with world market returns. Liberalizations are defined by regulatory changes, the introduction of depositary receipts and country funds, and structural breaks in equity capital flows to the emerging markets. We control for other economic events that might confound the impact of foreign speculators on local equity markets. Across a range of specifications, the cost of capital always decreases after a capital market liberalization with the effect varying between 5 and 75 basis points.

Suggested Citation

  • Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, April.
    • Handle: RePEc:bla:jfinan:v:55:y:2000:i:2:p:565-613
    DOI: 10.1111/0022-1082.00220
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    JEL classification:

    • F3 - International Economics - - International Finance
    • G0 - Financial Economics - - General

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