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International Linkage Of Asean Stock Prices: An Analysis Of Response Asymmetries

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  • Mansor H. IBRAHIM

Abstract

The paper evaluates response asymmetries in the international linkage of five founding members of ASEAN, namely, Indonesia, Malaysia, the Philippines, Singapore and Thailand. More specifically, we assess whether these markets react differently to market upturns and market downturns of two developed markets – US and Japan. Using simple regression and VAR models, we document the following results. First, in line with many studies on international interdependencies of equity prices, the US market is more dominant than the Japanese market in influencing the ASEAN markets. Second, the evidence strongly suggests significant responses of the ASEAN markets to the US market downturns. However, positive changes in the two advanced market indices do not seem to impact significantly on the ASEAN markets. Third, the pattern of responses based on impulse response functions further substantiate asymmetric responses of these markets to positive and negative shocks in the US markets. Lastly, the evidence for response asymmetry is stronger when only pre-Asian crisis sample is used. Our results, thus, suggest that the benefits of international portfolio diversification may not be forthcoming when they are needed most, that is, during market decline. Moreover, the ASEAN markets seem vulnerable to international financial crisis.

Suggested Citation

  • Mansor H. IBRAHIM, 2006. "International Linkage Of Asean Stock Prices: An Analysis Of Response Asymmetries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(3).
    • Handle: RePEc:eaa:aeinde:v:6:y:2006:i:3_16
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    References listed on IDEAS

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    Cited by:

    1. Rangan GUPTA & Roula INGLESI-LOTZ, 2012. "Macro Shocks and Real US Stock Prices with Special Focus on the “Great Recession”," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(2).
    2. Majeed, Ayesha & Masih, Mansur, 2016. "A study of long- run theoretical relationship between ASEAN stock market indices and developed stock market indices of US and Japan," MPRA Paper 79724, University Library of Munich, Germany.
    3. Robiyanto Robiyanto & Budi Frensidy & Ignatius Roni Setyawan & Andrian Dolfriandra Huruta, 2021. "A Different View on ASEAN Capital Market Integration," Economies, MDPI, vol. 9(4), pages 1-9, October.

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    More about this item

    Keywords

    Response Asymmetries; ASEAN markets; Impulse Response Functions;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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