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Asian Economic Integration and Stock Market Comovement

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  • Robert Johnson
  • Luc Soenen
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    Abstract

    Using daily returns from 1988 to 1998, we investigate to what degree twelve equity markets in Asia are integrated with Japan's equity market and examine the factors that affect the level of economic integration. We find that the equity markets of Australia, China, Hong Kong, Malaysia, New Zealand, and Singapore are highly integrated with the stock market in Japan. There is also evidence that these Asian markets become more integrated over time, especially since 1994. A higher import share as well as a greater differential in inflation rates, real interest rates, and gross domestic product growth rates have negative effects on stock market comovements between country pairs. Conversely, increased export share by Asian economies to Japan and greater foreign direct investment from Japan to other Asian economies contribute to greater comovement. Southern Finance Association and the Southwestern Finance Association.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal The Journal of Financial Research.

    Volume (Year): 25 (2002)
    Issue (Month): 1 ()
    Pages: 141-157

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    Handle: RePEc:bla:jfnres:v:25:y:2002:i:1:p:141-157

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    Cited by:
    1. Saadet Kirbas Kasman, 2006. "The Relationship Between Macroeconomic Volatility and Stock Market Volatility," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, Research and Business Development Department, Borsa Istanbul, vol. 8(32), pages 1-10.
    2. Nildag Basak Ceylan, 2006. "The Effects of G-7 Countries’ Stock Markets on the Istanbul Stock Exchange," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, Research and Business Development Department, Borsa Istanbul, vol. 8(32), pages 37-56.
    3. Yang, Lixiong & Lee, Chingnun & Shie, Fu Shuen, 2014. "How close a relationship does a capital market have with other markets? A reexamination based on the equal variance test," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 26(C), pages 198-226.
    4. Kui Fan & Zudi Lu & Shouyang Wang, 2009. "Dynamic Linkages Between the China and International Stock Markets," Asia-Pacific Financial Markets, Springer, Springer, vol. 16(3), pages 211-230, September.
    5. Claus, Edda & Lucey, Brian M., 2012. "Equity market integration in the Asia Pacific region: Evidence from discount factors," Research in International Business and Finance, Elsevier, Elsevier, vol. 26(2), pages 137-163.
    6. Asgharian, Hossein & Hess, Wolfgang & Liu, Lu, 2013. "A spatial analysis of international stock market linkages," Knut Wicksell Working Paper Series 2013/3, Knut Wicksell Centre for Financial Studies, Lund University.
    7. Hwahsin Cheng & John Glascock, 2005. "Dynamic Linkages Between the Greater China Economic Area Stock Markets—Mainland China, Hong Kong, and Taiwan," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 24(4), pages 343-357, June.
    8. Mahfuzul Haque & Imen Kouki, 2009. "Effect of 9/11 on the conditional time-varying equity risk premium: evidence from developed markets," Journal of Risk Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 10(3), pages 261-276, May.
    9. Pat Wilson & Ralf Zurbruegg & Richard Gerlach, 2002. "Structural Breaks and Diversification: The Impact of the 1997 Asian Financial Crisis on the Integration of Asia-Pacific Real Estate Markets," Working Paper Series, Finance Discipline Group, UTS Business School, University of Technology, Sydney 121, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    10. Melike E. Bildirici & Mehmet Salman, 2006. "Measuring Default Risk in Turkey: Econometric Approach," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, Research and Business Development Department, Borsa Istanbul, vol. 8(32), pages 11-36.
    11. Zheng Yi & Chen Heng & Wing-Keung Wong, 2009. "China’s Stock Market Integration with a Leading Power and a Close Neighbor," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 2(1), pages 38-74, December.
    12. Kim Hiang Liow, 2010. "Integration among USA, UK, Japanese and Australian securitised real estate markets: an empirical exploration," Journal of Property Research, Taylor & Francis Journals, Taylor & Francis Journals, vol. 27(4), pages 289-308, February.
    13. Paresh Kumar Narayan & Russell Smyth, 2004. "Modelling the linkages between the Australian and G7 stock markets: common stochastic trends and regime shifts," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(14), pages 991-1004.
    14. Singh, Priyanka & Kumar, Brajesh & Pandey, Ajay, 2010. "Price and volatility spillovers across North American, European and Asian stock markets," International Review of Financial Analysis, Elsevier, Elsevier, vol. 19(1), pages 55-64, January.
    15. Yan, Isabel K. & Chong, Terence & Lam, Tau-Hing, 2011. "Is the Chinese Stock Market Really Efficient," MPRA Paper 35219, University Library of Munich, Germany.
    16. Hwang, Eugene & Min, Hong-Ghi & Kim, Bong-Han & Kim, Hyeongwoo, 2013. "Determinants of stock market comovements among US and emerging economies during the US financial crisis," Economic Modelling, Elsevier, Elsevier, vol. 35(C), pages 338-348.
    17. Gregory C Chow & Shicheng Huang & Linlin Niu, 2013. "Econometric Analysis of Stock Price Co-movement in the Economic Integration of East Asia," Papers 2013-10-14, Working Paper.
    18. Johnson, Robert & Soenen, Luc, 2004. "The US stock market and the international value of the US dollar," Journal of Economics and Business, Elsevier, Elsevier, vol. 56(6), pages 469-481.
    19. Nikolaos L. Hourvouliades, 2009. "International Portfolio Diversification: Evidence from European Emerging Markets," European Research Studies Journal, European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 55-78.
    20. Johansson, Anders C. & Ljungwall, Christer, 2009. "Spillover Effects Among the Greater China Stock Markets," World Development, Elsevier, Elsevier, vol. 37(4), pages 839-851, April.

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