IDEAS home Printed from https://ideas.repec.org/a/eee/intfin/v87y2023ics1042443123000872.html
   My bibliography  Save this article

Network structure and risk-adjusted return approach to stock indices integration: A study on Asia-Pacific countries

Author

Listed:
  • Rahman, Molla Ramizur
  • Misra, Arun Kumar
  • Lucey, Brian M.
  • Mohapatra, Sabyasachi
  • Kumar, Satish

Abstract

The study attempts to examine the stock market integration for Asia-Pacific countries using networks and forms Risk Adjusted Differential Return (RADR) and Benchmark Indices Network (BIN) indices. The RADR index is higher during the Global Financial Crisis (GFC), indicating a higher level of integration. The inter-country network structure is designed where network parameters are capable of explaining stock market integration. Network parameters are higher during the GFC and are used to form a network index - BIN. This study concludes BIN to be a better measure than RADR, as network parameters are independent of differential index return.

Suggested Citation

  • Rahman, Molla Ramizur & Misra, Arun Kumar & Lucey, Brian M. & Mohapatra, Sabyasachi & Kumar, Satish, 2023. "Network structure and risk-adjusted return approach to stock indices integration: A study on Asia-Pacific countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:intfin:v:87:y:2023:i:c:s1042443123000872
    DOI: 10.1016/j.intfin.2023.101819
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042443123000872
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intfin.2023.101819?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chowdhury, Biplob & Dungey, Mardi & Kangogo, Moses & Sayeed, Mohammad Abu & Volkov, Vladimir, 2019. "The changing network of financial market linkages: The Asian experience," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 71-92.
    2. Suk-Joong Kim & Fari Moshirian & Eliza Wu, 2018. "Dynamic Stock Market Integration Driven by the European Monetary Union: An Empirical Analysis," World Scientific Book Chapters, in: Information Spillovers and Market Integration in International Finance Empirical Analyses, chapter 10, pages 305-368, World Scientific Publishing Co. Pte. Ltd..
    3. Raj Aggarwal & Brian Lucey & Cal Muckley, 2010. "Dynamics of Equity Market Integration in Europe: Impact of Political Economy Events," Journal of Common Market Studies, Wiley Blackwell, vol. 48(3), pages 641-660, June.
    4. Chelley-Steeley, Patricia, 2004. "Equity market integration in the Asia-Pacific region: A smooth transition analysis," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 621-632.
    5. Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005. "Market Integration and Contagion," The Journal of Business, University of Chicago Press, vol. 78(1), pages 39-70, January.
    6. Thomas Lagoarde-Segot & Brian M. Lucey, 2006. "Equity Markets and Economic Development: What Do We Know," The Institute for International Integration Studies Discussion Paper Series iiisdp182, IIIS.
    7. Wu, Fei, 2020. "Stock market integration in East and Southeast Asia: The role of global factors," International Review of Financial Analysis, Elsevier, vol. 67(C).
    8. Yarovaya, Larisa & Brzeszczyński, Janusz & Goodell, John W. & Lucey, Brian & Lau, Chi Keung Marco, 2022. "Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    9. Robert Johnson & Luc Soenen, 2002. "Asian Economic Integration and Stock Market Comovement," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(1), pages 141-157, March.
    10. Narayan, S. & Sriananthakumar, S. & Islam, S.Z., 2014. "Stock market integration of emerging Asian economies: Patterns and causes," Economic Modelling, Elsevier, vol. 39(C), pages 19-31.
    11. Gilmore, Claire G. & Lucey, Brian M. & Boscia, Marian W., 2010. "Comovements in government bond markets: A minimum spanning tree analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4875-4886.
    12. Malliaropulos, Dimitrios, 1998. "International stock return differentials and real exchange rate changes," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 493-511, June.
    13. Z. Wang & J. Yang & D. A. Bessler, 2003. "Financial crisis and African stock market integration," Applied Economics Letters, Taylor & Francis Journals, vol. 10(9), pages 527-533.
    14. Kearney, Colm & Lucey, Brian M., 2004. "International equity market integration: Theory, evidence and implications," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 571-583.
    15. repec:taf:raflxx:v:2:y:2006:i:6:p:395-400 is not listed on IDEAS
    16. Gregory Birg & Brian M. Lucey, 2006. "Integration Of Smaller European Equity Markets : A Time-Varying Integration Score Analysis," The Institute for International Integration Studies Discussion Paper Series iiisdp136, IIIS.
    17. Aswini Kumar Mishra & Anand Theertha & Isha Mahesh Amoncar & Manogna R L, 2022. "Equity market integration in emerging economies: a network visualization approach," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 50(4), pages 696-717, June.
    18. Kearney, Colm & Muckley, Cal, 2007. "Reassessing the evidence of an emerging yen block in North and Southeast Asia," International Review of Economics & Finance, Elsevier, vol. 16(2), pages 255-271.
    19. Lucey, Brian M. & Steeley, James, 2006. "Measuring and assessing the effects and extent of international bond market integration," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(1), pages 1-3, February.
    20. Coelho, Ricardo & Gilmore, Claire G. & Lucey, Brian & Richmond, Peter & Hutzler, Stefan, 2007. "The evolution of interdependence in world equity markets—Evidence from minimum spanning trees," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 376(C), pages 455-466.
    21. Sanjay Sehgal & Piyush Pandey & Florent Deisting, 2018. "Stock Market Integration Dynamics and its Determinants in the East Asian Economic Community Region," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 389-425, June.
    22. Li, Hong & Majerowska, Ewa, 2008. "Testing stock market linkages for Poland and Hungary: A multivariate GARCH approach," Research in International Business and Finance, Elsevier, vol. 22(3), pages 247-266, September.
    23. Jian Yang & James Kolari & Insik Min, 2003. "Stock market integration and financial crises: the case of Asia," Applied Financial Economics, Taylor & Francis Journals, vol. 13(7), pages 477-486.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lucey, Brian M. & Vigne, Samuel A. & Ballester, Laura & Barbopoulos, Leonidas & Brzeszczynski, Janusz & Carchano, Oscar & Dimic, Nebojsa & Fernandez, Viviana & Gogolin, Fabian & González-Urteaga, Ana , 2018. "Future directions in international financial integration research - A crowdsourced perspective," International Review of Financial Analysis, Elsevier, vol. 55(C), pages 35-49.
    2. Yarovaya, Larisa & Brzeszczyński, Janusz & Goodell, John W. & Lucey, Brian & Lau, Chi Keung Marco, 2022. "Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    3. Anil Sharma & Neha Seth, 2012. "Literature review of stock market integration: a global perspective," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 4(1), pages 84-122, April.
    4. Patel, Ritesh & Goodell, John W. & Oriani, Marco Ercole & Paltrinieri, Andrea & Yarovaya, Larisa, 2022. "A bibliometric review of financial market integration literature," International Review of Financial Analysis, Elsevier, vol. 80(C).
    5. Sei-Wan Kim & Moon Jung Choi, 2016. "Does Intra-Regional Trade Matter in Regional Stock Markets?: New Evidence from Asia-Pacific Region," Working Papers 2016-11, Economic Research Institute, Bank of Korea.
    6. Niţoi, Mihai & Pochea, Maria Miruna, 2020. "Time-varying dependence in European equity markets: A contagion and investor sentiment driven analysis," Economic Modelling, Elsevier, vol. 86(C), pages 133-147.
    7. Lucey, Brian M. & Muckley, Cal, 2011. "Robust global stock market interdependencies," International Review of Financial Analysis, Elsevier, vol. 20(4), pages 215-224, August.
    8. Choudhry, Taufiq & Lu, Lin & Peng, Ke, 2007. "Common stochastic trends among Far East stock prices: Effects of the Asian financial crisis," International Review of Financial Analysis, Elsevier, vol. 16(3), pages 242-261.
    9. Samitas, Aristeidis & Kampouris, Elias & Polyzos, Stathis, 2022. "Covid-19 pandemic and spillover effects in stock markets: A financial network approach," International Review of Financial Analysis, Elsevier, vol. 80(C).
    10. Pym Manopimoke & Suthawan Prukumpai & Yuthana Sethapramote, 2018. "Dynamic Connectedness in Emerging Asian Equity Markets," International Symposia in Economic Theory and Econometrics, in: Banking and Finance Issues in Emerging Markets, volume 25, pages 51-84, Emerald Group Publishing Limited.
    11. Bhattacharjee, Biplab & Kumar, Rajiv & Senthilkumar, Arunachalam, 2022. "Unidirectional and bidirectional LSTM models for edge weight predictions in dynamic cross-market equity networks," International Review of Financial Analysis, Elsevier, vol. 84(C).
    12. Xu, Hao & Li, Songsong, 2023. "What impacts foreign capital flows to China's stock markets? Evidence from financial risk spillover networks," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 559-577.
    13. Muhammad Niaz Khan & Suzanne G. M. Fifield & Nongnuch Tantisantiwong & David M. Power, 2022. "Changes in co-movement and risk transmission between South Asian stock markets amidst the development of regional co-operation," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(1), pages 87-117, March.
    14. Arouri, Mohamed & Teulon, Frédéric & Rault, Christophe, 2013. "Equity risk premium and regional integration," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 79-85.
    15. 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, vol. 26(2), pages 137-163.
    16. Aladesanmi, Olalekan & Casalin, Fabrizio & Metcalf, Hugh, 2019. "Stock market integration between the UK and the US: Evidence over eight decades," Global Finance Journal, Elsevier, vol. 41(C), pages 32-43.
    17. Sudha Narayanan & Sowmya Dhanaraj & Arun Kumar Gopalaswamy & M. Suresh Babu, "undated". "Trade, Financial Flows and Stock Market Interdependence: Evidence from Asian Markets," Working Papers 2017-158, Madras School of Economics,Chennai,India.
    18. Sowmya Dhanaraj & Arun Kumar Gopalaswamy & Suresh Babu M, 2013. "Dynamic interdependence between US and Asian markets: an empirical study," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 5(2), pages 220-237, April.
    19. Niţoi, Mihai & Pochea, Maria Miruna, 2019. "What drives European Union stock market co-movements?," Journal of International Money and Finance, Elsevier, vol. 97(C), pages 57-69.
    20. Samitas, Aristeidis & Kampouris, Elias & Kenourgios, Dimitris, 2020. "Machine learning as an early warning system to predict financial crisis," International Review of Financial Analysis, Elsevier, vol. 71(C).

    More about this item

    Keywords

    Stock-market integration; Asia-Pacific region; Network structure; Differential return;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:intfin:v:87:y:2023:i:c:s1042443123000872. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/intfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.