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Dynamic linkages between Thai and international stock markets

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  • Abbas Valadkhani
  • Surachai Chancharat

Abstract

Purpose - This purpose of this paper is to investigate the existence of cointegration and causality between the stock market price indices of Thailand and its major trading partners (Australia, Hong Kong, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, the UK and the USA), using monthly data spanning December 1987 to December 2005. Design/methodology/approach - This paper used both the Engle‐Granger two‐step procedure (assuming no structural breaks) and the Gregory and Hansen test (allowing for one structural break) provide no evidence of a long‐run relationship between the stock prices of Thailand and these countries. Findings - Based on the empirical results obtained from these two residual‐based cointegration tests, potential long‐run benefits exist from diversifying the investment portfolios internationally to reduce the associated systematic risks across countries. However, in the short‐run, three unidirectional Granger causalities run from the stock returns of Hong Kong, the Philippines and the UK to those of Thailand, pair‐wise. Furthermore, there are two unidirectional causalities running from the stock returns of Thailand to those of Indonesia and the USA. Empirical evidence was also found of bidirectional Granger causality, suggesting that the stock returns of Thailand and three of its neighbouring countries (Malaysia, Singapore and Taiwan) are interrelated. Originality/value - No previous study examines the possibility that the pair‐wise long‐run relationship between the stock prices of Thailand and those of both emerging and developed markets may have been subject to a structural break.

Suggested Citation

  • Abbas Valadkhani & Surachai Chancharat, 2008. "Dynamic linkages between Thai and international stock markets," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 35(5), pages 425-441, September.
  • Handle: RePEc:eme:jespps:v:35:y:2008:i:5:p:425-441
    DOI: 10.1108/01443580810903572
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    Citations

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    Cited by:

    1. Roberto Dell'Anno & Ferda Halicioglu, 2010. "An ARDL model of unrecorded and recorded economies in Turkey," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(6), pages 627-646, November.
    2. Urom, Christian & Ndubuisi, Gideon & Del Lo, Gaye & Yuni, Denis, 2023. "Global commodity and equity markets spillovers to Africa during the COVID-19 pandemic," Emerging Markets Review, Elsevier, vol. 55(C).
    3. Rahim, Adam Mohamed & Masih, Mansur, 2018. "Comovement of stock markets of Singapore and its major Asian trading partners," MPRA Paper 110319, University Library of Munich, Germany.
    4. Kasilingam Lingaraja & Murugesan Selvam & Vinayagamoorthi Vasanth & Ramachandran Rajesh Ramkumar, 2015. "Long-run Overseas Portfolio Diversification Benefits and Opportunities of Asian Emerging Stock Markets and Developed Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 324-333.
    5. 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.
    6. Dosse Toulaboe, 2022. "Cointegration of Equity Markets in Three Country Groups of OECD Countries," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 10(1), pages 11-31.
    7. Rahman, Nadiah & Masih, Mansur, 2018. "Do deposits in islamic banks have an impact on equity market? evidence from Malaysia," MPRA Paper 98734, University Library of Munich, Germany.
    8. Amanjot SINGH & Parneet KAUR, 2015. "Stock Market Linkages: Evidence From the US, China and India During the Subprime Crisis," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 8(1), pages 137-162, June.
    9. Samad, Fadillah & Masih, Mansur, 2016. "Lead-lag relationship between domestic credit and economic growth: the case of Singapore," MPRA Paper 107380, University Library of Munich, Germany.
    10. Joseph Emmanuel Tetteh & Anthony Amoah & Deodat Emilson Adenutsi, 2019. "Drivers of Stock Market Returns in Sub-Saharan Africa: Evidence from Selected Countries," Asian Development Policy Review, Asian Economic and Social Society, vol. 7(3), pages 191-208, September.
    11. HUSSAIN Haroon & HUSSAIN Rana Yasir & SHAH Syed Waqar Azeem & FRAZ Ahmed, 2012. "International Portfolio Diversification In Developing Equity Markets Of South Asia," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 7(1), pages 80-100, April.
    12. Rahman, Nadiah Abd & Masih, Mansur, 2017. "Does the islamic bank deposit have an effect on equity market ? Malaysian case," MPRA Paper 106789, University Library of Munich, Germany.
    13. Parul Bhatia & Hemalatha Ramasubramanian, 2019. "Co-integration Between Sensex and Other Popular Indices: A Decadal Study," FIIB Business Review, , vol. 8(2), pages 108-117, June.
    14. 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, vol. 26(C), pages 198-226.
    15. Dr. Ranjan Dasgupta, 2014. "Integration and Dynamic Linkages of the Indian Stock Market with Bric - An Empirical Study," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(6), pages 715-731, June.
    16. Domingo Rodríguez Benavides & César Gurrola Ríos & Francisco López Herrera, 2021. "Dependencia de los mercados de valores de Argentina, Brasil y México respecto del estadounidense: Covid19 y otras crisis financieras recientes," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(3), pages 1-18, Julio - S.
    17. Eli Bouri & Andre Eid & Imad Kachacha, 2014. "The Dynamic Behaviour and Determinants of Linkages among Middle Eastern and North African Stock Exchanges," Economic Issues Journal Articles, Economic Issues, vol. 19(1), pages 1-22, March.
    18. Yong Kheng Goh & Haslifah M Hasim & Chris G Antonopoulos, 2018. "Inference of financial networks using the normalised mutual information rate," PLOS ONE, Public Library of Science, vol. 13(2), pages 1-21, February.
    19. Okotori, Tonprebofa & Ayunku, Peter, 2019. "An empirical investigation on efficient market test for the Nigerian stock exchange (NSE)," MPRA Paper 110516, University Library of Munich, Germany.
    20. Razmi, Fatemeh & M., Azali & Chin, Lee & Habibullah, Muzafar Shah, 2015. "The effects of oil price and US economy on Thailand's macroeconomy: The role of monetary transmission mechanism," MPRA Paper 69096, University Library of Munich, Germany.
    21. Rattaphon Wuthisatian, 2014. "Cointegration of Stock Markets," Review of Market Integration, India Development Foundation, vol. 6(3), pages 297-320, December.
    22. Dimpfl, Thomas, 2014. "A note on cointegration of international stock market indices," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 10-16.
    23. Naseri, Marjan & Masih, Mansur, 2014. "Integration and Comovement of Developed and Emerging Islamic Stock Markets: A Case Study of Malaysia," MPRA Paper 58799, University Library of Munich, Germany.
    24. Syed Muhammad Aamir Shah & Muhammad Husnain & Ashraf Ali, 2012. "Is Pakistani Equity Market Integrated to the Equity Markets of Group of Eight (G8) Countries? An Empirical Analysis of Karachi Stock Exchange," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 289-324, September.
    25. Elie I Bouri, 2013. "Correlation and Volatility of the MENA Equity Markets in Turbulent Periods, and Portfolio Implications," Economics Bulletin, AccessEcon, vol. 33(2), pages 1575-1593.

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