This paper evaluates the impact of privatization on the development of capital markets in a two-country general equilibrium model. We draw particular attention to two divestment techniques, share issue privatizations (in developed market systems) and voucher privatizations (in transition economies). It is shown how these two privatization methods can have an impact, by diversification effects, on supplies of private assets, demands for assets, market capitalizations and international asset allocation strategies. We show that even a non-marketed privatization (free distribution of public assets to private individuals) has market-effects, by altering portfolio choices.