IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/22244.html
   My bibliography  Save this paper

Volatility Co-movement of ASEAN-5 Equity Markets

Author

Listed:
  • Oh, Swee-Ling
  • Lau, Evan
  • Puah, Chin-Hong
  • Abu Mansor, Shazali

Abstract

Purpose – Economic cross-linkages and the increased co-movement of asset prices across international markets are important outcomes as the result of globalization. Hereby, the nature of international stock markets and the extent to which the 1997-1998 East Asian turmoil had affected the market relationship of five countries of Association of Southeast Asian Nations (ASEAN-5) remain as probing questions. Design/methodology/approach – We resort to the standard time series econometrics analysis. These include the unit root, cointegration and the Granger causality tests. Hereby, further empirical analyzes is conducted upon two sub-periods of interest: (1) pre-crisis period from 1987:1 to 1997:7 and (2) post-crisis period from 1997:8 to 2007:12. This is to allow for possible transitional motion leading to and departing from the crisis. Findings – Using an array of econometrics analysis upon the stock price volatility series, we found partial market integration for the pre-crisis; whereas in the post-crisis, complete integration prevails. Hence, the financial meltdown in 1997 is said to be a contagion led crisis as markets integrate well off after the crisis than prior to it. Nonetheless, long run portfolio asset diversification benefits across the ASEAN-5 basin are reduced as markets are integrated in both the pre- and post-crisis. Originality/value – The paper is of value by showing to uncover the issue of interdependence of stock market integration focusing on the ASEAN-5 economies. The formation of the ASEAN Investment Area (AIA- 1998) parallel with the establishment of a developed ASEAN Index-Financial Times Stock Exchange (FTSE) regional index is viable to foster deeper regional market convergence.

Suggested Citation

  • Oh, Swee-Ling & Lau, Evan & Puah, Chin-Hong & Abu Mansor, Shazali, 2010. "Volatility Co-movement of ASEAN-5 Equity Markets," MPRA Paper 22244, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22244
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/22244/1/MPRA_paper_22244.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Masih, Rumi & Masih, Abul M. M., 2001. "Long and short term dynamic causal transmission amongst international stock markets," Journal of International Money and Finance, Elsevier, vol. 20(4), pages 563-587, August.
    2. Fernandez-Serrano, Jose L. & Sosvilla-Rivero, Simon, 2001. "Modelling evolving long-run relationships: the linkages between stock markets in Asia," Japan and the World Economy, Elsevier, vol. 13(2), pages 145-160, April.
    3. Kenneth Kasa, 1995. "Comovements among national stock markets," Economic Review, Federal Reserve Bank of San Francisco, pages 14-20.
    4. Koutmos, Gregory & Booth, G Geoffrey, 1995. "Asymmetric volatility transmission in international stock markets," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 747-762, December.
    5. Dwyer, Gerald Jr. & Wallace, Myles S., 1992. "Cointegration and market efficiency," Journal of International Money and Finance, Elsevier, vol. 11(4), pages 318-327, August.
    6. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    7. 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.
    8. 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.
    9. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    10. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    11. Ewing, Bradley T. & Payne, James E. & Sowell, Clifford, 1999. "NAFTA and North American stock market linkages: an empirical note," The North American Journal of Economics and Finance, Elsevier, vol. 10(2), pages 443-451.
    12. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
    13. Levy, Haim & Sarnat, Marshall, 1970. "International Diversification of Investment Portfolios," American Economic Review, American Economic Association, vol. 60(4), pages 668-675, September.
    14. Bekaert, Geert & Harvey, Campbell R., 1997. "Emerging equity market volatility," Journal of Financial Economics, Elsevier, vol. 43(1), pages 29-77, January.
    15. Masih, Abul M. M. & Masih, Rumi, 1999. "Are Asian stock market fluctuations due mainly to intra-regional contagion effects? Evidence based on Asian emerging stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 7(3-4), pages 251-282, August.
    16. Bekaert, Geert & Harvey, Campbell R., 2002. "Research in emerging markets finance: looking to the future," Emerging Markets Review, Elsevier, vol. 3(4), pages 429-448, December.
    17. Jang, Hoyoon & Sul, Wonsik, 2002. "The Asian financial crisis and the co-movement of Asian stock markets," Journal of Asian Economics, Elsevier, vol. 13(1), pages 94-104.
    18. W. N. W. Azman-Saini & M. Azali & M. S. Habibullah & K. G. Matthews, 2002. "Financial integration and the ASEAN-5 equity markets," Applied Economics, Taylor & Francis Journals, vol. 34(18), pages 2283-2288.
    19. Wheatley, Simon, 1988. "Some tests of international equity integration," Journal of Financial Economics, Elsevier, vol. 21(2), pages 177-212, September.
    20. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    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. Guesmi, Khaled & Kablan, Sandrine, 2015. "Financial integration and Japanese stock market," MPRA Paper 70206, University Library of Munich, Germany.
    2. repec:eee:riibaf:v:42:y:2017:i:c:p:1244-1253 is not listed on IDEAS

    More about this item

    Keywords

    ASEAN-5; Portfolio Diversification; Volatility co-movement;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:22244. 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: (Joachim Winter) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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.