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Correlation Dynamics in East Asian Financial Markets

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  • Kuper, Gerard
  • Lestano, L

    (University of Groningen)

Abstract

This paper examines the dynamic relationship between stock returns and exchange rate changes using daily data from January 3, 1994 - September 27, 2013 for six East Asian countries: Indonesia, Malaysia, the Philippines, Singapore, South Korea and Thailand. We estimate conditional correlations using the multivariate GARCH-DCC model in order to disclose the relationship between stock markets and foreign exchange markets. This is important for understanding financial stability. The estimation results reveal time varying correlations in the pre and post Asian crisis and the Global Financial Crisis periods for all countries. The correlations are stronger when the crisis intensies. The degree of interdependence between both markets reflects a mutually markets response to shocks and changes in policy.

Suggested Citation

  • Kuper, Gerard & Lestano, L, 2014. "Correlation Dynamics in East Asian Financial Markets," Research Report 14029-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    • Handle: RePEc:gro:rugsom:14029-eef
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    File URL: https://hdl.handle.net/11370/11fe6dd0-efbe-4e37-a7d5-409088a5f0da
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