Financial liberalization and emerging stock market efficiency: an empirical analysis of structural changes

This article aims to determine the impact of financial liberalization on the informational efficiency in emerging stock markets. For this purpose, we estimate a time-varying parameter model combined with structural change technique for 13 emerging economies from January 1986 to December 2008. Empirical results show a greater efficiency in recent years. They also show that the structural breaks detected in the emerging market predictability indices coincide with the official liberalization dates, and with their alternative events. These findings corroborate those of the related literature regarding how emerging markets react to the adoption of the financial liberalization process.