Time varying equity market beta as an index of financial openness?

• Published in: Applied financial economics Vol. 23; no. 11; pp. 921 - 928
• Main Authors: Rizvi, S. K. A., Naqvi, B., Bordes, C.
• Format: Journal Article
• Language: English
• Published: London Routledge 01-06-2013; Routledge, Taylor & Francis Group; Taylor & Francis (Routledge)
• Subjects: Asian economies; Correlation analysis; Economics and Finance; Equity; Financial integration; Financial liberalization; financial openness; Humanities and Social Sciences; Integrated approach; Securities markets; Securities prices; Standardization; stock market integration; Studies; Transparency; financial integration; financial openness; Asian economies; stock market integration
• ISSN: 0960-3107; 1466-4305
• DOI: 10.1080/09603107.2013.778946

From the data consisting of over a century, there has been a significant relationship between capital account liberalization and increasing correlation among national stock markets of different countries (Quinn and Voth,
2008
). In this research we propose a price based de facto measure of financial integration/openness that can be used to rank selected Asian economies solely on the basis of standardized co-movements of their equity markets in relation to the representative world markets. We call this new measure as time varying equity market beta (TVEMB). Significant degree of correlation with some major and complex indices and the ability to show dynamic de facto situations of financial openness, supported by several evidences, allow us to use TVEMB as an alternative measure in conjunction with other indicators of financial openness/integration.