The Internationalization Of Emerging Equity Markets Domestic Market Development Or Retardation

Download or read book The Internationalization of Emerging Equity Markets Domestic Market Development or Retardation? written by Kent W. Hargis and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Why have emerging equity markets grown so rapidly since 1990? This paper examines the link between foreign investment liberalizations and the expansion of these markets in Latin America. First, it is shown how international listings can transform a segmented local equity market from an equilibrium of low liquidity and market capitalization to an integrated market with high liquidity, diversifiable risk and market capitalization by altering the incentives of individuals to participate in the market. Second, benefits of liberalization for domestic stock market development and welfare across emerging equity markets are shown to be negatively related to both the degree of correlation between the domestic and world equity market and the relative size of the domestic equity market. Third, the price impact of international listing is shown to depend on the liquidity conditions in the domestic market prior to listing. Fourth, the relative benefits of various forms of investment liberalization for domestic stock market development are compared.