Stock market liberalization and price response: gradualism versus cold turkey

Daehwan Kim, Jung Inn Kim and Taeyoon Sung

Applied Economics, 2013, vol. 45, issue 3, 273-285

Abstract: We present a simple analytical framework that illustrates the impact of two types of market liberalization on stock prices: cold turkey versus gradual liberalization. Using this theoretical framework, we show that gradual stock market liberalization can have a negative impact on stock prices when such gradual liberalization increases uncertainty about future stock prices. We examine the liberalization experience of the Korean stock market, and find that our analysis could be relevant in that case.

Date: 2013
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DOI: 10.1080/00036846.2011.597731

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