Stock Market Integration Dynamics and its Determinants in the East Asian Economic Community Region

Sanjay Sehgal (), Piyush Pandey () and Florent Deisting
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Sanjay Sehgal: University of Delhi
Piyush Pandey: University of Delhi

Journal of Quantitative Economics, 2018, vol. 16, issue 2, No 4, 389-425

Abstract: Abstract We study the dynamic nature of equity market integration for the ASEAN+6 countries referred as East Asia Economic Community (EAEC) Region from January 1999 to March 2015. Copula GARCH models have been employed to study the inter-temporal process of equity market integration. Empirical results show that the sample countries exhibit varying degrees of integration with the Asian benchmark. The 6 countries that form part of EAEC but not ASEAN (China, Japan, South Korea, Australia, India and New Zealand) exhibit high level of integration followed by ASEAN-5 (Indonesia, Malaysia, Philippines, Singapore and Thailand) members. Equity portfolio flows within the EAEC region reconfirm the findings based on price data that regional integration is strengthening over time. Further, results from the panel data analysis show that fiscal position, stock market performance, external position, governance and trade linkages seem to be the fundamental drivers of equity market integration in this region. The paper contributes to the International Finance literature, especially dealing with regional economic blocs by providing strong arguments for expanding the ASEAN Economic Community region in the near future to a more economically viable East Asian Economic Community region.

Keywords: Stock market integration; ASEAN; Time varying copula; Panel data analysis; Capital market development (search for similar items in EconPapers)
JEL-codes: C13 C52 F21 F36 G15 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s40953-017-0090-7

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