Journal of Financial Economics
Volume 71, Issue 2, February 2004, Pages 239–263
 

Kee-Hong Bae (a), Kalok Chan (b), , , Angela Ng (b)
a College of Business Administration, Korea University, Seoul 136-701, South Korea
b Department of Finance, Hong Kong University of Science and Technology, Clearwater Bay, Hong Kong, China

http://dx.doi.org/10.1016/S0304-405X(03)00166-1

Abstract
Unlike previous studies that examine how emerging market return volatility changes subsequent to stock market liberalization, this paper investigates the impact of investibility, or the degree to which a stock can be foreign-owned, on emerging market volatility. We find a positive relation between return volatility and the investibility of individual stocks, even after controlling for country, industry, firm size, and turnover. We also find that a highly investible emerging market portfolio is subject to larger world market exposure than a non-investible portfolio, suggesting that highly investible stocks are more integrated with the world and therefore more vulnerable to world market risk.

Keywords
Emerging market; Stock return volatility; Investibility; Market integration