Skip to main content

Research Repository

Advanced Search

The degree of financial liberalization and aggregated stock-return volatility in emerging markets

Umutlu, Mehmet; Akdeniz, Levent; Altay-Salih, Aslihan


Levent Akdeniz

Aslihan Altay-Salih


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.

Journal Article Type Article
Acceptance Date Aug 17, 2009
Online Publication Date Aug 19, 2009
Publication Date 2010-03
Deposit Date Jan 29, 2023
Journal Journal of Banking & Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 34
Issue 3
Pages 509-521