IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v26y2012i2p137-163.html
   My bibliography  Save this article

Equity market integration in the Asia Pacific region: Evidence from discount factors

Author

Listed:
  • Claus, Edda
  • Lucey, Brian M.

Abstract

The paper investigates stock market integration among 10 economies in the Asia Pacific region over the period April to May 2006 based on a recently developed technique that relies on estimating expected discount rates; see Flood and Rose (2005a,b). The results show a limited but varying degree of stock market integration among the 10 economies. Membership in a formal economic organization does not seem to affect the degree of integration.

Suggested Citation

  • Claus, Edda & Lucey, Brian M., 2012. "Equity market integration in the Asia Pacific region: Evidence from discount factors," Research in International Business and Finance, Elsevier, vol. 26(2), pages 137-163.
  • Handle: RePEc:eee:riibaf:v:26:y:2012:i:2:p:137-163
    DOI: 10.1016/j.ribaf.2011.09.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531911000432
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert P. Flood & Andrew K. Rose, 2005. "A New Approach To Asset Integration: Methodology And Mystery," Pacific Economic Review, Wiley Blackwell, vol. 10(1), pages 5-28, February.
    2. Gordon de Brouwer, 2003. "Financial Markets, Institutions, and Integration in East Asia," Asian Economic Papers, MIT Press, vol. 2(1), pages 53-80.
    3. Raffaella Giacomini & Halbert White, 2006. "Tests of Conditional Predictive Ability," Econometrica, Econometric Society, vol. 74(6), pages 1545-1578, November.
    4. Robert Johnson & Luc Soenen, 2002. "Asian Economic Integration and Stock Market Comovement," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(1), pages 141-157, March.
    5. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-1329, December.
    6. Paresh Kumar Narayan & Russell Smyth, 2005. "Cointegration Of Stock Markets Between New Zealand, Australia And The G7 Economies: Searching For Co‐Movement Under Structural Change," Australian Economic Papers, Wiley Blackwell, vol. 44(3), pages 231-247, September.
    7. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    8. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2006. "Growth volatility and financial liberalization," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 370-403, April.
    9. Gikas A. Hardouvelis & Dimitrios Malliaropulos & Richard Priestley, 2006. "EMU and European Stock Market Integration," The Journal of Business, University of Chicago Press, vol. 79(1), pages 365-392, January.
    10. Pierre-Olivier Gourinchas & Olivier Jeanne, 2006. "The Elusive Gains from International Financial Integration," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 715-741.
    11. Xiao‐Ming Li, 2006. "A Revisit Of International Stock Market Linkages: New Evidence From Rank Tests For Nonlinear Cointegration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(2), pages 174-197, May.
    12. G. Sivalingam, 2008. "Financial Reforms In An Emerging Economy: The Case Of Malaysia," Economic Papers, The Economic Society of Australia, vol. 27(4), pages 393-402, December.
    13. Suk-Joong Kim, 2018. "Information Leadership in the Advanced Asia-Pacific Stock Markets: Return, Volatility and Volume Information Spillovers from the US and Japan," World Scientific Book Chapters, in: Information Spillovers and Market Integration in International Finance Empirical Analyses, chapter 9, pages 271-304, World Scientific Publishing Co. Pte. Ltd..
    14. Robert P. Flood & Andrew K. Rose, 2005. "Financial Integration: A New Methodology And An Illustration," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1349-1359, December.
    15. David Dickinson, 2000. "Stock market integration and macroeconomic fundamentals: an empirical analysis, 1980-95," Applied Financial Economics, Taylor & Francis Journals, vol. 10(3), pages 261-276.
    16. Andrew Worthington & Helen Higgs, 2004. "Transmission of equity returns and volatility in Asian developed and emerging markets: a multivariate GARCH analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(1), pages 71-80.
    17. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
    18. Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005. "Market Integration and Contagion," The Journal of Business, University of Chicago Press, vol. 78(1), pages 39-70, January.
    19. Masih, A. Mansur M. & Masih, Rumi, 2002. "Propagative causal price transmission among international stock markets: evidence from the pre- and postglobalization period," Global Finance Journal, Elsevier, vol. 13(1), pages 63-91.
    20. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    21. Click, Reid W. & Plummer, Michael G., 2005. "Stock market integration in ASEAN after the Asian financial crisis," Journal of Asian Economics, Elsevier, vol. 16(1), pages 5-28, February.
    22. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    23. Wyn Morgan & Nicholas Snowden, 2007. "Comparative Advantage and the Gains from Financial Trade: A Reappraisal," The World Economy, Wiley Blackwell, vol. 30(2), pages 342-362, February.
    24. Chae-Shick Chung & Chong Ook Rhee, 2002. "Financial Linkage in East Asian Countries since the East Asian Crisis," Asian Economic Papers, MIT Press, vol. 1(3), pages 122-147.
    25. Jongkyou Jeon & Yonghyup Oh & Doo Yong Yang, 2006. "Financial Market Integration in East Asia: Regional or Global?," Asian Economic Papers, MIT Press, vol. 5(1), pages 73-89, Winter.
    26. Yung Chul Park, 2007. "Whither Financial and Monetary Integration in East Asia?," Asian Economic Papers, MIT Press, vol. 6(3), pages 95-128, Fall.
    27. Wright, Mark L.J., 2005. "On the gains from international financial integration," Economics Letters, Elsevier, vol. 87(3), pages 379-386, June.
    28. Jian Yang & James Kolari & Insik Min, 2003. "Stock market integration and financial crises: the case of Asia," Applied Financial Economics, Taylor & Francis Journals, vol. 13(7), pages 477-486.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nguyen, Canh Phuc & Nguyen, Thai Vu Hong & Schinckus, Christophe, 2019. "Institutions, economic openness and stock return co-movements: An empirical investigation in emerging markets," Finance Research Letters, Elsevier, vol. 28(C), pages 137-147.
    2. Boyle, Glenn, 2009. "Capital Market Integration: A Review of the Issues and an Assessment of New Zealand's Position," Working Paper Series 4034, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. Hatemi-J, Abdulnasser, 2012. "Is the UAE stock market integrated with the USA stock market? New evidence from asymmetric causality testing," Research in International Business and Finance, Elsevier, vol. 26(2), pages 273-280.
    4. Mensah, Jones Odei & Premaratne, Gamini, 2018. "Integration of ASEAN banking sector stocks," Journal of Asian Economics, Elsevier, vol. 59(C), pages 48-60.
    5. Hatemi-J, Abdulnasser & Mustafa, Alan, 2016. "Testing for Financial Market Integration of the Chinese Market with the US Market," MPRA Paper 72733, University Library of Munich, Germany.
    6. Mensah, Jones Odei & Premaratne, Gamini, 2018. "Dependence patterns among Asian banking sector stocks: A copula approach," Research in International Business and Finance, Elsevier, vol. 45(C), pages 357-388.
    7. Donadelli, Michael & Persha, Lauren, 2014. "Understanding emerging market equity risk premia: Industries, governance and macroeconomic policy uncertainty," Research in International Business and Finance, Elsevier, vol. 30(C), pages 284-309.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mensah, Jones Odei & Premaratne, Gamini, 2018. "Integration of ASEAN banking sector stocks," Journal of Asian Economics, Elsevier, vol. 59(C), pages 48-60.
    2. Sebnem Kalemli-Ozcan & Elias Papaioannou & José-Luis Peydró, 2013. "Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity," Journal of Finance, American Finance Association, vol. 68(3), pages 1179-1228, June.
    3. Ahmed, Shamim & Liu, Xiaoquan & Valente, Giorgio, 2016. "Can currency-based risk factors help forecast exchange rates?," International Journal of Forecasting, Elsevier, vol. 32(1), pages 75-97.
    4. Chien, Mei-Se & Lee, Chien-Chiang & Hu, Te-Chung & Hu, Hui-Ting, 2015. "Dynamic Asian stock market convergence: Evidence from dynamic cointegration analysis among China and ASEAN-5," Economic Modelling, Elsevier, vol. 51(C), pages 84-98.
    5. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2011. "Financial Openness and Productivity," World Development, Elsevier, vol. 39(1), pages 1-19, January.
    6. Cavit Pakel & Neil Shephard & Kevin Sheppard, 2009. "Nuisance parameters, composite likelihoods and a panel of GARCH models," OFRC Working Papers Series 2009fe03, Oxford Financial Research Centre.
    7. Dewandaru, Ginanjar & Alaoui, Abdelkader & Masih, A. Mansur M. & Alhabshi, Syed Othman, 2013. "Comovement and resiliency of Islamic equity market: Evidence from GCC Islamic equity index based on wavelet analysis," MPRA Paper 56980, University Library of Munich, Germany.
    8. Golinelli, Roberto & Parigi, Giuseppe, 2005. "Short-Run Italian GDP Forecasting and Real-Time Data," CEPR Discussion Papers 5302, C.E.P.R. Discussion Papers.
    9. Sarno, Lucio & Schneider, Paul & Wagner, Christian, 2012. "Properties of foreign exchange risk premiums," Journal of Financial Economics, Elsevier, vol. 105(2), pages 279-310.
    10. West, Kenneth D., 2006. "Forecast Evaluation," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 1, chapter 3, pages 99-134, Elsevier.
    11. Jonathan A. Batten & Peter G. Szilagyi & Wagner, 2015. "Should emerging market investors buy commodities?," Applied Economics, Taylor & Francis Journals, vol. 47(39), pages 4228-4246, August.
    12. Anne Epaulard & Aude Pommeret, 2016. "Financial Integration, Growth and Volatility," Pacific Economic Review, Wiley Blackwell, vol. 21(3), pages 330-357, August.
    13. Jennifer Corbett, 2010. "Asian Financial Integration," Chapters, in: Noel Gaston & Ahmed M. Khalid (ed.), Globalization and Economic Integration, chapter 5, Edward Elgar Publishing.
    14. Docherty, Paul & Hurst, Gareth, 2018. "Return dispersion and conditional momentum returns: International evidence," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 263-278.
    15. Clark, Todd & McCracken, Michael, 2013. "Advances in Forecast Evaluation," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 1107-1201, Elsevier.
    16. Bernales, Alejandro & Guidolin, Massimo, 2014. "Can we forecast the implied volatility surface dynamics of equity options? Predictability and economic value tests," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 326-342.
    17. Berardi, Michele & Galimberti, Jaqueson K., 2017. "Empirical calibration of adaptive learning," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 219-237.
    18. Hajo Holzmann & Matthias Eulert, 2014. "The role of the information set for forecasting - with applications to risk management," Papers 1404.7653, arXiv.org.
    19. Agnieszka Gehringer, 2012. "Financial liberalization, growth, productivity and capital accumulation: The case of European integration," FIW Working Paper series 086, FIW.
    20. Ahmed, Abdullahi D. & Mmolainyane, Kelesego K., 2014. "Financial integration, capital market development and economic performance: Empirical evidence from Botswana," Economic Modelling, Elsevier, vol. 42(C), pages 1-14.

    More about this item

    Keywords

    Stock market integration; Non-linear panel estimations;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:26:y:2012:i:2:p:137-163. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Haili He). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.