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Stock market liberalization and price response: gradualism versus cold turkey

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  • Daehwan Kim
  • Jung Inn Kim
  • Taeyoon Sung

Abstract

We present a simple analytical framework that illustrates the impact of two types of market liberalization on stock prices: cold turkey versus gradual liberalization. Using this theoretical framework, we show that gradual stock market liberalization can have a negative impact on stock prices when such gradual liberalization increases uncertainty about future stock prices. We examine the liberalization experience of the Korean stock market, and find that our analysis could be relevant in that case.

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  • Daehwan Kim & Jung Inn Kim & Taeyoon Sung, 2013. "Stock market liberalization and price response: gradualism versus cold turkey," Applied Economics, Taylor & Francis Journals, vol. 45(3), pages 273-285, January.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:3:p:273-285
    DOI: 10.1080/00036846.2011.597731
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    Cited by:

    1. Giamattei, Marcus, 2015. "Cold Turkey vs. Gradualism - Evidence on Disinflation Strategies from a Laboratory Experiment," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-67-15, University of Passau, Faculty of Business and Economics.
    2. Marcus Giamattei, 2022. "Can Cold Turkey Reduce Inflation Inertia? Evidence on Disinflation and Level‐k Thinking from a Laboratory Experiment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2477-2517, December.

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