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This paper investigates whether stock‐price indexes of emerging markets can be characterized as random walk (unit root) or mean reversion processes. We implement a panelbased test that exploits cross‐sectional information from seventeen emerging equity markets during the period January 1985 to April 2002. The gain in power allows us to reject the null hypothesis of random walk in favor of mean reversion at the 5 percent significance level. We find a positive speed of reversion with a half‐life of about 30 months. These results are similar to those documented for developed markets. Our findings provide an interesting comparison to existing studies on more matured markets and reduce the likelihood of earlier mean reversion findings as attributable to data mining.

Recent studies of the impact of financial liberalization in emerging markets have not examined the dynamic impact of the liberalization process on equity returns despite the important implications on ongoing reform policies. We analyze six Asian equity markets using a dynamic adjustment model with three independent variables: market capitalization value, pricebook value ratio, and price‐earnings ratio. We use panel data for the period 1991‐2000 and the LSDVR (least square dummy variable regression) approach to identify the timing effects of liberalization. The stability of the model is also tested. The results indicate, in most cases, the significance of all three variables and the timing effects. Evidence of significant structural changes is also supported.

This paper examines how accounting quality, as measured by earnings opacity, affects the stock market wealth effect, which in turn is shown to be linked to economic growth. Stock market wealth effect is negatively affected by earnings opacity. The data also indicate that the exogenous component of the stock market wealth effect — the component defined by earnings opacity‐ is positively associated with economic growth. The direct effect of earnings opacity on economic growth is, as expected negative, but insignificant.

This paper empirically investigates the link between expected returns on stocks and a set of variables that describe the general state of economic activity. The model relates the first and second conditional moments on stock excess returns to the conditional variances and covariances of a set of prespecified macroeconomic factors. The estimation results suggest that industrial production growth, inflation, and short‐term interest rates help explain the behavior over time of expected excess returns on stocks.

It is found that one unit root, common trend is shared by the quarterly auction price series of five frequently auctioned types of stamps. The common trends analysis provides specific, stationary linear combinations, or cointegrating portfolios, of the auction price levels. The quarterly returns for the system of cointegrated auction prices can be represented by an error correction model using past returns and cointegrating vectors. There is evidence of a positive relationship between changes in the common trend and leading changes in industrial production

Terrorism, an important component of Political risk as a possible determinant of ADRs (American Depository Receipts) returns have received little attention in academic literature. To address this issue and examine whether political risk is a major determinant of ADR returns of emerging market countries, this paper empirically examines market valuation of Indian ADRs around acts of terrorism. Using a sample of 52 such events in the sample period Jan 2003‐Dec 2003 we empirically analyze returns of Indian ADRs. The results from our study indicate a marginally negative significant effect, failing to indicate that event of terrorist attacks severely affect the Indian ADRs listed on the US stock market. This may be explained by a combined effect of; (a) the optimism of US investors towards emerging markets, and (b) market participants becoming more resilient and making informed choices around the “general” events of terrorism.

This study uses a two‐step GARCH‐M procedure to observe mean‐return and volatility transmissions between Latin American markets and to Latin America from external markets during the period 1993–2000. The results indicate that mean‐return transmissions are common both within region and from external markets. The volatility transmission results are consistent with contagion theory and indicate that traders use both domestic news events as well as information contained by volatility in other markets in their information set.

In this study, perceptual mapping was used to identify the post 9/11 positions of ten, competing Middle Eastern nations as foreign direct investment (FDI) options. The perceived position of the “ideal” nation also was identified. FDI executives indicated that a limited number of Middle Eastern nations are positioned to benefit from future foreign direct investments. However, none of the nations studied hold a strategically superior position. The stability of a nation’s political and economic risk, economic opportunities, and natural resources contributes to a nation’s perceived position. Some nations face more significant FDI obstacles than others.

In this study, perceptual mapping was used to identify the collective and individual positions of ten emerging Central American countries with respect to their attractiveness potential for FDI. The perceived position of the “ideal” country also was captured in the study. FDI executives surveyed indicated that some of Central America's emerging countries have positioned themselves strategically in terms of the available market opportunities and advantageous business incentives. The stability of a country's economic and political systems contributes significantly to a country's perceived position. Some countries, such as Guatemala, Honduras, and Nicaragua, appear better positioned to take advantage of their strengths, whereas others, such as Guyana, French Guyana, and Suriname, face significant obstacles.

The accelerating globalization of business and integration of financial markets are affecting the equity investment environment of emerging markets (EMS). For the study period, we do not observe statistically significant region or industry effects on the returns of the EMS country equity indexes. All measurements indicate a high degree of integration for EMS regions and broad industry categories. The relative size of region and industry effects and Pearson correlations, however, indicate the dominance of region effects over industry effects. In the EMS world, as a starting step, regional diversification will be more efficient than industrial diversification.