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ASEAN-5 and Indian Financial Market Linkages: Evidence from Cointegration and Factor Analysis

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  • Ritesh Patel

    (Institute of Management, Nirma University, India.)

Abstract

Research Question: How the ASEAN-5 and Indian markets are integrated with respect to pre and post 2008 financial crisis? Motivation: The past studies have not covered ASEAN-5 and Indian market. Further, the market integration has implication for portfolio diversification. This Puzzle is solved by adopting different investment portfolio options for pre- and post-crisis period. Majority of the past studies were conducted using weekly or monthly data but the present study is conducted using daily data to get results that are more robust. Idea: The core idea is that examining the portfolio diversification opportunity and integration among the markets with respect to pre- and post-crisis. The study focuses on whether the level of integration among the markets improved after the crisis or not. Data: The study is performed covering a data from January 1, 1998 to 30 March 2020. A period from January 1, 1998 to June 30, 2008 is denoted as Pre-crisis period and a period from January 1, 2009 to March 30, 2020 is taken as a post-crisis period. The data of indexes are taken from investing.com database. The study is performed on the five original ASEAN members (Indonesia, Malaysia, the Philippines, Singapore, Thailand) and India. Method/Tools: The study is performed using Correction, Unit Root Test, Granger Causality Test, Johnsen Cointegration Test and Factor Analysis. The study has adopted descriptive research design. Findings: The outcome of the study reveals that after the financial crisis, the markets become more integrated with each other and hence the portfolio diversification opportunity is reduced for the investors as compare to pre-crisis period. The investors can diversify their investment portfolio to the relevant market. Further, the government can consider the level of integration to draft monetary and macroeconomic policies. Contributions: This study add latest findings to the literature review as it considers the 2008 global financial crisis for study and the study is conducted by considering the data till March 2020. It provides implications for Investors, government and MNCs.

Suggested Citation

  • Ritesh Patel, 2021. "ASEAN-5 and Indian Financial Market Linkages: Evidence from Cointegration and Factor Analysis," Capital Markets Review, Malaysian Finance Association, vol. 29(1), pages 41-58.
    • Handle: RePEc:mfa:journl:v:29:y:2021:i:1:p:41-58
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    References listed on IDEAS

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    1. Patel, Ritesh & Goodell, John W. & Oriani, Marco Ercole & Paltrinieri, Andrea & Yarovaya, Larisa, 2022. "A bibliometric review of financial market integration literature," International Review of Financial Analysis, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    Market integration; ASEAN markets; financial crisis; cointegration test;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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