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Financial Integration between Indonesia and Its Major Trading Partners

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Author Info
Abdul Karim, Bakri
Abdul Majid, M. Shabri
Abdul Karim, Samsul Ariffin

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Abstract

This study examines stock market integration among the emerging stock market of Indonesia and its major trading partners (Japan, the US, Singapore and China). We employ the newly proposed autoregressive distributed lag (ARDL) approach to cointegration and recent weekly stock market data spanning from July 1998 to December 2007. The results indicate the Indonesian stock market is cointegrated with the stock markets of the US, Japan, Singapore and China. Thus, this implies that the opportunities for international investors to gain benefits from international portfolio diversification in those markets are limited. In addition, any development in Japan, the US, Singapore and China markets should be considered by the Indonesian government in making policies regarding to the stock market of Indonesia.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17277.

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Date of creation: 14 Sep 2009
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Handle: RePEc:pra:mprapa:17277

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Related research
Keywords: Stock Market Integration; Portfolio Diversification; Trading Partners;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
F15 - International Economics - - Trade - - - Economic Integration

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    Other versions:
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  16. Chowdhury, Mamta B., 2005. "Trade Reforms and Economic Integration in South Asia: SAARC to SAPTA," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(4). [Downloadable!]
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    Other versions:
  19. Paresh Narayan & Russell Smyth & Mohan Nandha, 2004. "Interdependence and dynamic linkages between the emerging stock markets of South Asia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(3), pages 419-439. [Downloadable!] (restricted)
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