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Stock Market Linkages between the Asean Countries, China and the US: A Fractional Integration/cointegration Approach

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  • Guglielmo Maria Caporale
  • Luis A. Gil-Alana
  • Kefei You

Abstract

This paper examines stock market integration between the five ASEAN countries and both the US and China in turn, over the period from November 2002 to August 2020. The linkages between both aggregate and financial sector stock indices (both weekly and monthly) are analyzed using fractional integration and fractional cointegration methods. Further, recursive cointegration analysis is carried out for the weekly series to study the impact of the 2007–8 global financial crisis and the 2015 China stock market crash on the pattern of stock market co-movement. The main findings are the following. All stock indices exhibit long-range dependence. There is cointegration between the five ASEAN countries and the US but almost none between the former and China, except between Indonesia and China in the case of the financial sector. The 2007–8 global financial crisis and the 2015 Chinese stock market plunge weakened the linkages between the ASEAN five and both China and the US. The implications of these results for market participants and policy makers are discussed.

Suggested Citation

  • Guglielmo Maria Caporale & Luis A. Gil-Alana & Kefei You, 2022. "Stock Market Linkages between the Asean Countries, China and the US: A Fractional Integration/cointegration Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(5), pages 1502-1514, April.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:5:p:1502-1514
    DOI: 10.1080/1540496X.2021.1898366
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    Cited by:

    1. Hsiang-Hsi Liu & Chien-Kuo Tseng, 2022. "Common Components in Co-integrated System and Its Estimation and Application: Evidence from Five Stock Markets in Asia-Pacific Chinese Region," Bulletin of Applied Economics, Risk Market Journals, vol. 9(2), pages 101-121.
    2. 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.

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