Stock market liberalization and return volatility: Evidence from the emerging market of Sri Lanka

Fazeel M. Jaleel and Lalith P. Samarakoon

Journal of Multinational Financial Management, 2009, vol. 19, issue 5, 409-423

Abstract: This study examines the impact of liberalization of the Sri Lankan stock market on return volatility. We specify GARCH and TGARCH models of volatility, and estimate them using 16 years of weekly returns for the period from 1985 to 2000. The results show that liberalization of the market to foreign investors significantly increased the return volatility in the Colombo Stock Exchange. Both conditional and unconditional volatility measures are the highest in the liberalization period. Negative return shocks lead to lower volatility suggesting that there is no leverage effect, and this appears to reflect the very low levels of leverage used by Sri Lankan companies.

Keywords: Liberalization; Volatility; GARCH; and; TGARCH; models; Emerging; markets (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:19:y:2009:i:5:p:409-423

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