The impact of financial liberalization on stock price volatility in emerging markets

Is financial market liberalization. i.e., increased accessibility for international investors, in emerging economies a conduit to greater stock price volatility? If so, capital controls may be a useful policy option. Using daily returns for 10 emerging markets coupled with a world index, we find that South Korea, Mexico, and Turkey suffered from greater volatility, Argentina, Chile, Malaysia, and the Philippines experienced diminished volatility, and no definitive pattern can be discerned for the other countries after market liberalization. Our result is important because our sample period includes the Asian financial crises. (C) 2000 Academic Press.