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Integration of world leaders and emerging powers into the Malaysian stock market: A DCC-MGARCH approach


  • Lean, Hooi Hooi
  • Teng, Kee Tuan


This paper examines the financial integration of two world leaders (the U.S. and Japan) and two emerging powers (China and India) into the Malaysian stock market. A DCC-MGARCH approach is employed to examine the correlations among these countries in a time-variant manner to indicate the degree of financial integration among the countries. It is found that the financial integration between Malaysia and China started to evolve in April 2004. Strong financial integration between the stock markets in India and Malaysia was observed. In contrast, the volatility spillover effect from the U.S. to Malaysia disappeared, especially in the short term. Nevertheless, the study suggests that in the long run, investors in Malaysia could gain by diversifying their portfolios in China and Japan relative to India and the U.S.

Suggested Citation

  • Lean, Hooi Hooi & Teng, Kee Tuan, 2013. "Integration of world leaders and emerging powers into the Malaysian stock market: A DCC-MGARCH approach," Economic Modelling, Elsevier, vol. 32(C), pages 333-342.
  • Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:333-342 DOI: 10.1016/j.econmod.2013.02.013

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    3. Al Shugaa, Ameen & Masih, Mansur, 2014. "Uncertainty and Volatility in MENA Stock Markets During the Arab Spring," MPRA Paper 58867, University Library of Munich, Germany.
    4. Boubaker, Sabri & Jouini, Jamel, 2014. "Linkages between emerging and developed equity markets: Empirical evidence in the PMG framework," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 322-335.
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    8. Naseri, Marjan & Masih, Mansur, 2014. "Integration and Comovement of Developed and Emerging Islamic Stock Markets: A Case Study of Malaysia," MPRA Paper 58799, University Library of Munich, Germany.
    9. Cardona, Laura & Gutiérrez, Marcela & Agudelo, Diego A., 2017. "Volatility transmission between US and Latin American stock markets: Testing the decoupling hypothesis," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 115-127.
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    14. Jouini, Jamel, 2015. "New empirical evidence from assessing financial market integration, with application to Saudi Arabia," Economic Modelling, Elsevier, vol. 49(C), pages 198-211.
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