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Idiosyncratic Risk and Emerging Market Liberalization (2008)
BibTeX
@MISC{Huang08idiosyncraticrisk,
author = {Biqing Huang and Rodolfo Martell and John Wald},
title = {Idiosyncratic Risk and Emerging Market Liberalization},
year = {2008}
}
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Abstract
We test the impact of idiosyncratic risk on stock returns for emerging markets. We expect that idiosyncratic risk should be positively associated with returns prior to financial market liberalization, but that liberalization should diminish this effect. Moreover, prior to liberalization, we expect that the number of stocks available in the market should be negatively correlated with the degree to which idiosyncratic risk is priced. On average, the empirical evidence supports these hypotheses. These findings suggest that the degree to which idiosyncratic risk is priced may be useful as a measure of financial market liberalization.
