Pricing shares on a Nascent market: The Nepal Stock Exchange 1994-96

Stimulated by their ability to facilitate privatization and to attract portfolio inflows, recent literature on less-developed country (LDC) stock exchanges has focused on relatively well-established "emerging markets." Wide international variations in the ratio of market capitalization to GDP, however, confirm that an important role for equity markets in economic development is not assured. This study of early equity pricing in Nepal therefore addresses the initial difficulties of establishing a viable exchange. It investigates equity pricing in the absence of a trading history, identifies favored equity characteristics and provides tentative evidence on the market valuation of liquidity before discussing policy inferences. (C) 1999 Elsevier Science Ltd. All rights reserved.