Economic integration and stock market dynamic linkages: evidence in the context of Australia and Asia

Sudharshan Reddy Paramati, Eduardo Roca and Rakesh Gupta

Applied Economics, 2016, vol. 48, issue 44, 4210-4226

Abstract: Countries are becoming economically integrated and it is contended that this will also lead to their financial markets becoming integrated. This contention is important since international financial market integration diminishes portfolio diversification benefits and creates contagion risk. We test this contention in this article in the context of the Australasian region. Australia and Asia have experienced very significant economic integration through a rapid growth in their bilateral trade. We utilize a battery of econometric techniques – cointegration, asymmetric generalized dynamic conditional correlations and panel regression models. As expected, we find that trade intensity significantly drives the interdependence between their stock markets in both the short run and the long run. Thus, given the ever increasing economic integration in this region, this finding implies that their stock markets face the risk of contagion, and that investors in these markets would also be confronted with the prospect of lower diversification benefits.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2016.1153794 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:48:y:2016:i:44:p:4210-4226

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2016.1153794

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().