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AbstractThe efficient markets hypothesis in finance suggests that as equity markets are liberalized and made more open to the public, equity prices should reflect the increased availability of information and be more efficiently priced. In this paper, we examine whether emerging market equity prices have become more efficient after financial liberalization. Using two sets of financial liberalization dates, a battery of econometric tests, and data from sixteen countries and three composite portfolios, we find that in spite of theory suggesting the opposite, liberalization does not seem to have improved the efficiency of emerging markets. In fact, most of our statistical tests indicate that the markets were already efficient before the actual liberalization.

AbstractWe examine portfolio credit quality holding and daily return patterns in a large sample of bond mutual funds and document evidence of window dressing. Using portfolio credit quality holdings data, we find that bond funds on average hold significantly more government bonds during disclosure than nondisclosure, presumably to present a safer portfolio to shareholders. Multiple‐index market models estimated with daily returns data corroborate these findings. We detect differences in factor loadings on days surrounding disclosure dates that indicate systematic tilting of the portfolio toward higher quality instruments.

This article shows how a state could design a lottery that absorbs some of the financial market's systematic risk. Under this lottery, prizes would be positively correlated with the stock market. This lottery could be a profitable complement to existing state lotteries.