Trade openness and the informational efficiency of emerging stock markets

Lim , Kian Ping and Kim, Jaeh Yun (2011) Trade openness and the informational efficiency of emerging stock markets. Economic Modelling, 28 (5). pp. 2228-2238. ISSN 0264-9993

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Official URL: http://dx.doi.org/10.1016/j.econmod.2011.06.004

Abstract

This paper examines the empirical link between trade openness and the informational efficiency of stock markets in 23 developing countries. Our fixed effects panel regression results document a significant negative relation between trade openness and stock return autocorrelations only when the de facto measure is used. On this basis, we argue that a greater level of de facto trade openness is associated with a higher degree of informational efficiency in these emerging stock markets because the former signals higher future firm profitability, and investors tend to react faster to information when there is less uncertainty about a firm's future earnings or cash flows. Further analyses find no significant association between the extent of financial openness and the degree of informational efficiency.

Item Type:Article
Uncontrolled Keywords:Emerging stock markets, Financial openness, Informational efficiency, Return autocorrelations, Trade openness
Subjects:H Social Sciences > HG Finance
Divisions:SCHOOL > Labuan School of International Business and Finance
ID Code:4960
Deposited By:IR Admin
Deposited On:25 Sep 2012 16:34
Last Modified:16 Feb 2015 11:52

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