Asia’s Stock Markets: Are There Crouching Tigers and Hidden Dragons?

 
Author/Editor: Fabian Lipinsky ; Li Lian Ong
 
Publication Date: February 26, 2014
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Stock markets play a key role in corporate financing in Asia. However, despite their increasing importance in terms of size and cross-border investment activity, the region’s markets are reputed to be more “idiosyncratic” and less reliant on economic and corporate fundamentals in their pricing. Using a model that draws on international asset pricing and economic theory, as well as accounting literature, we find evidence of greater idiosyncratic influences in the pricing of Asia’s stock markets, compared to their G-7 counterparts, beyond the identified systematic factors and local fundamentals. We also show proof of a significant relationship between the strength of implementation of securities regulations and the “noise” in stock pricing, which suggests that improvements in the regulation of securities markets in Asia could enhance the role of stock markets as stable and reliable sources of financing into the future.
 
Series: Working Paper No. 14/37
Subject(s): Stock markets | Asia | Stock prices | Foreign investment | Securities regulations | Pricing policy | Developed countries | Emerging markets | Cross country analysis | Economic models

 
English
Publication Date: February 26, 2014
ISBN/ISSN: 9781484320143/1018-5941 Format: Paper
Stock No: WPIEA2014037 Pages: 46
Price:
US$18.00 (Academic Rate:
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