Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - The degree of financial liberalization and aggregated stock-return volatility in emerging markets
AU - Umutlu, Mehmet
AU - Akdeniz, Levent
AU - Altay-Salih, Aslihan
PY - 2010/3
Y1 - 2010/3
N2 - In this study, we address whether the degree of financial liberalization affects the aggregated total volatility of stock returns by considering the time-varying nature of financial liberalization. We also explore channels through which the degree of financial liberalization impacts aggregated total volatility. We document a negative relation to the degree of financial liberalization after controlling for size, liquidity, country, and crisis effects, especially for small and medium-sized markets. Moreover, the degree of financial liberalization transmits its negative impact on aggregated total volatility through aggregated idiosyncratic and local volatilities. Overall, our results provide evidence in favor of the view that the broadening of the investor base due to the increasing degree of financial liberalization causes a reduction in the total volatility of stock returns.
AB - In this study, we address whether the degree of financial liberalization affects the aggregated total volatility of stock returns by considering the time-varying nature of financial liberalization. We also explore channels through which the degree of financial liberalization impacts aggregated total volatility. We document a negative relation to the degree of financial liberalization after controlling for size, liquidity, country, and crisis effects, especially for small and medium-sized markets. Moreover, the degree of financial liberalization transmits its negative impact on aggregated total volatility through aggregated idiosyncratic and local volatilities. Overall, our results provide evidence in favor of the view that the broadening of the investor base due to the increasing degree of financial liberalization causes a reduction in the total volatility of stock returns.
KW - return volatility
KW - financial liberalization
U2 - 10.1016/j.jbankfin.2009.08.010
DO - 10.1016/j.jbankfin.2009.08.010
M3 - Journal article
VL - 34
SP - 509
EP - 521
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 3
ER -