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Do foreigners facilitate information transmission in emerging markets?

Listed author(s):
  • Bae, Kee-Hong
  • Ozoguz, Arzu
  • Tan, Hongping
  • Wirjanto, Tony S.

Using the degree of accessibility of foreign investors to emerging stock markets, or investibility, as a proxy for the extent of foreign investments, we assess whether investibility has a significant influence on the diffusion of global market information across stocks in emerging markets. We show that greater investibility reduces price delay to global market information. We also find that returns of highly investible stocks lead those of noninvestible stocks because they incorporate global information more quickly. These results are consistent with the idea that financial liberalization in the form of greater investibility yields informationally more efficient stock prices in emerging markets.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304405X12000025
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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 105 (2012)
Issue (Month): 1 ()
Pages: 209-227

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Handle: RePEc:eee:jfinec:v:105:y:2012:i:1:p:209-227
DOI: 10.1016/j.jfineco.2012.01.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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