Short- and Long-Term Effects of Capital Market Internationalization on the Stock Market ——Evidence from the Inclusion of China A-Shares in the MSCI Index

This paper assesses the short- and long- term market reaction to the inclusion of A-shares in the MSCI Emerging Markets Index. In the short term, the underlying stocks gain cumulative excess returns before and after the announcement date, reflecting a positive signal to the market and presenting a significant index effect. In the long run, it can improve the market quality by influencing stock market synchronization and liquidity, turnover rate. Therefore, we suggest that emerging market countries should actively internationalize their capital markets, actively introduce foreign investors, increase investor awareness and improve their capital market structures