Stock Market Cycles, Financial Liberalization and Volatility

Sebastian Edwards, Javier Gomez Biscarri, Fernando Perez de Gracia

NBER Working Paper No. 9817
Issued in July 2003
NBER Program(s):International Finance and Macroeconomics, Asset Pricing

In this paper we analyze the behavior of stock markets in six emerging countries. More specifically, we describe the bull and bear cycles of four Latin American and two Asian countries, comparing their characteristics during both phases and the degree of concordance of bullish periods. We divide our sample in two subperiods in order to account for differences induced by the financial liberalization processes that these countries went through in the early 1990's. We find that cycles in emerging countries tend to have shorter duration and larger amplitude and volatility than in developed countries. However, after financial liberalization Latin American stock markets have behaved more similarly to stock markets in developed countries whereas Asian countries have become more dissimilar. Concordance of cycles across markets has increased significantly over time, especially for Latin American countries after liberalization.

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Document Object Identifier (DOI): 10.3386/w9817

Published: Edwards, Sebastian & Biscarri, Javier Gomez & Perez de Gracia, Fernando, 2003. "Stock market cycles, financial liberalization and volatility," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 925-955, December. citation courtesy of

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