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The Integration of International Capital Market from Indonesian Investors¡¯ Perspective: Do Integration Still Give Diversification Benefit

Author

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  • Sabilil Hakimi Amizuar
  • Anny Ratnawati
  • Trias Andati

Abstract

The objective of this study is to analyze whether, despite the international equity liberalization and growing world financial integration, Indonesian investors can be beneficial from international diversification. The study covers both emerging markets (Indonesia, Philippines, Malaysia, Thailand, Korea, China, and Taiwan) and developed markets (USA, UK, Japan, Singapore, and Australia) over the period of January 1st, 2007 to April 30st, 2017. It uses several state-of-the-art techniques: multivariate cointegration and vector error correction models (VECM) with the analysis of impulse response function (IRF) and forecast error variance decomposition (FEVD) to analyze the long-term level of integration and time-varying correlations with the Dynamic Conditional Correlation (DCC) aproach to analyze short term level of integration. The analysis provides the evidence of integration berween Indonesian market and international markets. The findings suggest that Indonesian investors have more chance to gain international diversification benefit from developed markets rather than emerging markets as the Indonesian market has low level of integration compared to developed markets.

Suggested Citation

  • Sabilil Hakimi Amizuar & Anny Ratnawati & Trias Andati, 2017. "The Integration of International Capital Market from Indonesian Investors¡¯ Perspective: Do Integration Still Give Diversification Benefit," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(9), pages 157-165, September.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:9:p:157-165
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    References listed on IDEAS

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    More about this item

    Keywords

    developing markets; emerging markets; financial integration; indonesian investors; level of integration;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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