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Financial Liberalisation and Breaks in Stock Market Volatility: Evidence from East Asia

Author

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  • Panicos Demetriades

    (University of Leicester)

  • Michaeil Karoglou

    (University of Leicester)

  • Siong Hook Law

    (University Putra Malaysia)

Abstract

This paper examines the short and medium term impact of financial reforms on stock market volatility in five East Asian emerging markets. Several newly proposed tests are employed to identify and verify the number and timing of structural breaks in the variance dynamics. The detected breakdates do not correspond to official liberalisation dates. The magnitude and direction of the change in volatility is estimated using parametric and non-parametric techniques. Our findings suggest that by taking into account the possibility of multiple breaks, a richer evolution of volatility is obtained than by focusing on official liberalisation dates. We also show that focussing on official liberalisation dates results in inaccurate inference

Suggested Citation

  • Panicos Demetriades & Michaeil Karoglou & Siong Hook Law, 2007. "Financial Liberalisation and Breaks in Stock Market Volatility: Evidence from East Asia," Money Macro and Finance (MMF) Research Group Conference 2006 162, Money Macro and Finance Research Group.
    • Handle: RePEc:mmf:mmfc06:162
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    References listed on IDEAS

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    5. Ajit Singh, 2003. "Capital account liberalisation, free long-term capital flows, financial crises and economic development," Chapters, in: Philip Arestis & Michelle Baddeley & John S.L. McCombie (ed.), Globalisation, Regionalism and Economic Activity, chapter 1, pages 15-46, Edward Elgar Publishing.
    6. Nilsson, Birger, 2002. "Financial Liberalization and the Changing Characteristics of Nordic Stock Returns," Working Papers 2002:4, Lund University, Department of Economics.
    7. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
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    Cited by:

    1. Gregory James & Michail Karoglou, 2010. "Financial liberalization and stock market volatility: the case of Indonesia," Applied Financial Economics, Taylor & Francis Journals, vol. 20(6), pages 477-486.

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