Stock market liberalization and return volatility

evidence from the emerging market of Sri Lanka

Fazeel M. Jaleel, Lalith P. Samarakoon*

*Corresponding author for this work

Research output: Contribution to journalArticle

12 Citations (Scopus)


This study examines the impact of liberalization of the Sri Lankan stock market on return volatility. We specify GARCH and TGARCH models of volatility, and estimate them using 16 years of weekly returns for the period from 1985 to 2000. The results show that liberalization of the market to foreign investors significantly increased the return volatility in the Colombo Stock Exchange. Both conditional and unconditional volatility measures are the highest in the liberalization period. Negative return shocks lead to lower volatility suggesting that there is no leverage effect, and this appears to reflect the very low levels of leverage used by Sri Lankan companies.

Original languageEnglish
Pages (from-to)409-423
Number of pages15
JournalJournal of Multinational Financial Management
Issue number5
Publication statusPublished - Dec 2009


  • Emerging markets
  • GARCH and TGARCH models
  • Liberalization
  • Volatility

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