Co-integration and Causality Analysis on Developed Asian Markets For Risk Management & Portfolio Selection
AbstractBoth practitioners and academicians demand a linkage model across financial markets, particularly among regional capital markets, for both risk management and portfolio selection purposes. Researchers frequently use co-integration and causality analysis in investigating the dependence or co-movement of three or more stock markets in different countries. However, they conducted the causality in mean tests but not the causality in variance tests. This study assesses the co-integration and causal relations among seven developed Asian markets, i.e Tokyo, Hongkong, Korea, Taiwan, Shanghai, Singapore, and Kuala Lumpur stock exchanges, using more frequent time series data. It employs the recently developed techniques for investigating unit roots, co-integration, time-varying volatility, and causality in variance. For estimating portfolio market risk, this study employs Value-at-Risk with delta-normal approach. The results show whether fund managers would be able to diversify their portfolio in these developed stock markets either in long run or short run.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10259.
Date of creation: 27 Aug 2008
Date of revision:
Risk Management; Causality; Co-integration; Asian Stock Markets;
Find related papers by JEL classification:
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
- G1 - Financial Economics - - General Financial Markets
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G0 - Financial Economics - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-13 (All new papers)
- NEP-RMG-2008-09-13 (Risk Management)
- NEP-SEA-2008-09-13 (South East Asia)
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