Financial liberalization and stock market volatility: the case of Indonesia

• Autores: Gregory A. James, Michail Karoglou
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 20, Nº. 4-6, 2010, págs. 477-486
• Idioma: inglés
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• Resumen

  • This article examines the relationship between financial liberalization and stock market volatility in Indonesia. By looking at the time series properties of the Jakarta Composite Index (JCI) we identify breaks in stock market volatility which coincide with the timing of major policy events. Our main findings are (i) a significant decrease in volatility after the 'official' opening of the stock market to foreign participation; (ii) a significant increase in volatility in the year before market opening following reforms that eased entry requirements and the issuance of brokerage licenses and (iii) a significant increase in volatility at the time of the Asian crisis followed by a significant decrease in the second and sixth years after the crisis.