The Role of Technology and Market Accessibility on Financial Market Classification

Abstract

Early classifications of markets as developed or emerging were somewhat arbitrary and tended to emphasize on the relative wealth of nations as the defining factor, along with subjective assessments of the market's quality. Due to the lack of transparency, investors found it difficult to predict the likelihood that a country would move between categories, and this environment did not encourage nations to adopt international best practices in an effort to advance their status. The market classification process organizes nations according to objective criteria and interacts with stock exchanges, regulators, and central banks in countries where the market is being evaluated for possible promotion or demotion. The process provides portfolio managers and asset allocators a clear picture of what to expect in terms of index evolution in the future. The measures of market accessibility and their effects on market classifications are the main topics of this paper. The study investigates how market infrastructure, market regulations, and market openness to foreign ownership influence market classification. The literature review serves as the foundation for the research methodology. It is concluded that improved market accessibility encourages market classification and allows nations to uphold global equity market standards.