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Stock market integration: Malaysia and its major trading partners

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  • Abdul Karim, Zulkefly
  • Abdul Karim, Bakri

Abstract

This study examines the stock market integration among Malaysia and its major trading partners by employing Johansen (1988) and Johansen and Juselius (1990) cointegration tests and VECM approach in investigating the dynamic linkages between markets. By using a weekly data, the results indicate that Malaysia stock market is significantly influenced by the stock market development from the major trading partners. The empirical findings are consistent with the view that stronger the bilateral trade ties between two countries, the higher the degree of comovements (Masih and Masih, 1999; Bracker et al., 1999). Since the markets move towards a greater integration, there are no opportunities for international portfolio diversification. In addition, any development in the stock market from major trading partners can not be ignored and should be taken into consideration by the Malaysian government in designing an appropriate policy in the domestic stock market.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26976.

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Date of creation: Dec 2008
Date of revision: Jun 2009
Handle: RePEc:pra:mprapa:26976

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Keywords: Cointegration; VECM; major trading partners; stock market integration;

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