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I would like to especially thank my advisor, Professor Pete Ferderer, for his guidance and support throughout the year. I am very grateful for his insights on this topic. My appreciation also goes out to Professor Gary Krueger and Professor Liang Ding, for providing me with further advice. I would also like to thank Katie Kong, for her assistance in helping me collect important data for this project. Last but not least, I would like to acknowledge Gaurang Mehta, Siddharth Jha and especially Linh To, for supporting me through the completion of this thesis.


This study analyzes the impact of stock market liberalization on emerging equity market volatility, in twelve emerging markets from February 1976 to December 2006. A liberalization period is constructed to capture all identified market openings for each market. The purpose of this study is three-fold. First, a univariate GARCH methodology is utilized to examine the time-varying nature of conditional volatility following initial market opening. Second, we analyze the effect of liberalization on stock market volatility while controlling for the fundamental sources of emerging equity market volatility. Finally, the study proposes a unique explanation for the differential impact of liberalization on volatility across countries. Univariate and multivariate GARCH estimates support previous empirical studies showing the differential impact of liberalization across countries. Results show countries that experienced reduced volatility during the post-liberalization period were significantly integrated with the world market during the sample period. Interestingly, our findings imply that the impact of stock market liberalization on equity market volatility is conditioned by the degree of market integration prior to liberalization and that integration leads to lower volatility over time.



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