Stock market liberalizations lead private investment booms. In a sample of 11 develop-ing countries that liberalized their stock markets, 9 experience growth rates of private investment above their non-liberalization median in the “rest year after liberalizing. In the second and third years after liberalization, this number is 10 of 11 and 8 of 11, respectively.The mean growth rate of private investment in the three years immediately following stock market liberalization exceeds the sample mean by 22 percentage points. The evidence stands in sharp contrast to recent work that suggests capital account liberalization has no elect on investment. 2000 Elsevier Science S.A. All rights reserved.