Stock market openings: Experience of emerging economies

This article is an exploratory examination of the benefits and risks associ ated with opening of stock markets. Specifically, we estimate changes in th e level and volatility of stock returns, inflation, and exchange rates arou nd market openings. We find that stock returns increase immediately after m arket opening without a concomitant increase in volatility. Stock markets b ecome more efficient as determined by testing the random walk hypothesis. W e find no evidence of an increase in inflation or an appreciation of exchan ge rates. If anything, inflation seems to decrease after market opening as do the volatility of inflation and volatility of exchange rates.