Volatility of Returns and Financial Liberalization: New Evidence

Norlida Salleh, Siong Hook Law and Tamat Sarmidi ()
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Norlida Salleh: Pusat Pengajian Ekonomi, Universiti Kebangsaan Malaysia 43600 Bangi, Selangor MALAYSIA
Tamat Sarmidi: Pusat Pengajian Ekonomi/Institut Kajian Rantau Asia Barat (IKRAB) Universiti Kebangsaan Malaysia 43600 Bangi, Selangor Malaysia

Jurnal Ekonomi Malaysia, 2012, vol. 46, issue 1, 101-106

Abstract: The main objective of this paper is to reinvestigate the relationship between liberalization and returns volatility by considering different level of economic fundamentals and level of openness. The real impact of financial liberalization is expected to vary across countries with different macroeconomic fundamentals and level of liberalization. This study is different from previous studies because we do not impose priori linear restriction on the estimation. Employing endogenous threshold estimation methods, our finding shows that the relationship between liberalization and returns volatility is nonlinear and the negative impact of liberalization can be annulled for countries with strong and stable government.

Keywords: Financial liberalization; non-linear; return volatility; threshold regression (search for similar items in EconPapers)
Date: 2012
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