0 Do Foreigners Facilitate Information Transmission in Emerging Markets?

Using the degree of accessibility of foreign investors to emerging stock markets, or investibility, as a proxy for the extent of foreign investments, we assess whether investibility has a significant influence on the diffusion of global market information across stocks in emerging markets. We show that greater investibility reduces the delay with which stock prices respond to the global market information. We also find that returns of highly investible stocks lead returns of non-investible stocks, but not vice versa. These results are consistent with the idea that financial liberalization in the form of greater investibility yields informationally more efficient stock prices in emerging markets