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Integration of ASEAN banking sector stocks

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  • Mensah, Jones Odei
  • Premaratne, Gamini

Abstract

In recent decades, ASEAN countries have made wide-ranging commitments and concerted efforts to achieve greater financial integration. We focus on the banking sector to investigate the degree of integration that has been achieved, both within ASEAN (Singapore, Malaysia, Thailand, the Philippines, and Indonesia) and externally with global markets (Japan, Hong Kong, China, India, and the USA). Specifically, we look at bank stock indexes and test for both correlation and causality across markets. Data are for the period 2000–2012 at daily frequency. Applying a dynamic conditional correlation (DEC) GARCH framework, we find evidence of rising correlation in market movements over time, both internal and external to ASEAN, although correlation coefficients remain low to moderate. Granger-causality tests show wide ranging transmission of volatility, with Singapore transmitting to all four other ASEAN markets and the USA to all five markets and Hong Kong to four. A quantile-based test for causality in conditional asymmetry finds more isolated occurrence of transmission.

Suggested Citation

  • Mensah, Jones Odei & Premaratne, Gamini, 2018. "Integration of ASEAN banking sector stocks," Journal of Asian Economics, Elsevier, vol. 59(C), pages 48-60.
  • Handle: RePEc:eee:asieco:v:59:y:2018:i:c:p:48-60
    DOI: 10.1016/j.asieco.2018.10.001
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    More about this item

    Keywords

    Banking sector stocks; Conditional asymmetry; Spillover; Dynamic correlation;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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