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The co-movement of stock markets in East Asia: Did the 1997-1998 Asian financial crisis really strengthen stock market integration?

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  • Huyghebaert, Nancy
  • Wang, Lihong
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    Abstract

    This paper examines the integration and causality of interdependencies among seven major East Asian stock exchanges before, during, and after the 1997-1998 Asian financial crisis. For this purpose, we use daily stock market data from July 1, 1992 to June 30, 2003 in local currency as well as US dollar terms. The data reveal that the relationships among East Asian stock markets are time varying. While stock market interactions are limited before the Asian financial crisis, we find that Hong Kong and Singapore respond significantly to shocks in most other East Asian markets, including Shanghai and Shenzhen, during this crisis. After the crisis, shocks in Hong Kong and Singapore largely affect other East Asian stock markets, except for those in Mainland China. Finally, considering the role of the USA shows that it strongly influences stock returns in East Asia - except for Mainland China - in all periods, while the reverse does not hold true.

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    Bibliographic Info

    Article provided by Elsevier in its journal China Economic Review.

    Volume (Year): 21 (2010)
    Issue (Month): 1 (March)
    Pages: 98-112

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    Handle: RePEc:eee:chieco:v:21:y:2010:i:1:p:98-112

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    Web page: http://www.elsevier.com/locate/chieco

    Related research

    Keywords: Stock market interdependencies Asian financial crisis VAR analysis Co-integration;

    References

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    Cited by:
    1. Tam, Pui Sun, 2014. "A spatial–temporal analysis of East Asian equity market linkages," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 304-327.
    2. Burdekin, Richard C.K. & Siklos, Pierre L., 2012. "Enter the dragon: Interactions between Chinese, US and Asia-Pacific equity markets, 1995–2010," Pacific-Basin Finance Journal, Elsevier, vol. 20(3), pages 521-541.
    3. Reuven Glick & Michael Hutchison, 2013. "China’s financial linkages with Asia and the global financial crisis," Working Paper Series 2013-12, Federal Reserve Bank of San Francisco.
    4. Lean, Hooi Hooi & Teng, Kee Tuan, 2013. "Integration of world leaders and emerging powers into the Malaysian stock market: A DCC-MGARCH approach," Economic Modelling, Elsevier, vol. 32(C), pages 333-342.
    5. Wang, Lihong, 2014. "Who moves East Asian stock markets? The role of the 2007–2009 global financial crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 182-203.

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