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Wydział Prawa i Administracji UAM

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Emerging stock markets: some lessons from history


Many stock markets develop in step with the country's economy. Of course there is likely some two-way causation between developments in the economy and stock markets. In the U.S., before the 1930's there was relatively little Federal control over stock markets, and stock markets evolved in a more or less satisfactory way. Swedish stock markets evolved over 100 years in a remarkable manner that may be applicable to an emerging stock market that government gives room to evolve. In the early 1890s, stocks traded once a month through one broker. In the later part of the decade another broker entered and trading occurred twice a month. No stock traded in every month during the decade, and the median and mean number of trades was one for stocks that traded at all. By the late teens of the twentieth century, the market had evolved to where a stock market index was meaningful. In the post second world war period, Swedish turnover taxes drove much trading to London for big firms and large trades. Bad government policy can hurt the evolution of emerging stock markets. Much interest in emerging stock markets arises from high returns and low correlation with developed-country markets. The belief in high returns and low correlations arises from data from the late 1980s and early 1990s. These patterns are unlikely to repeat. The benefits of diversification look substantially smaller when data from the 1890s on are examined, primarily because of the disasters of the first and second world wars. Emerging market economies should not count on continued outside interest that result from overestimation of the benefits of international diversification.



Digitalizacja i deponowanie archiwalnych zeszytów RPEiS sfinansowane przez MNiSW w ramach realizacji umowy nr 541/P-DUN/2016



Ruch Prawniczy, Ekonomiczny i Socjologiczny, 58, 1996, z. 4, s. 151-162



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Uniwersytet im. Adama Mickiewicza w Poznaniu
Biblioteka Uniwersytetu im. Adama Mickiewicza w Poznaniu
Ministerstwo Nauki i Szkolnictwa Wyższego