Co-movement analysis of Asian stock markets against FTSE100 and S&P 500: Wavelet-based approach

Adil Yilmaz and Gazanfer Unal ()
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Adil Yilmaz: Financial Economics Graduate Program, Yeditepe University, Istanbul 34755, Turkey
Gazanfer Unal: Financial Economics Graduate Program, Yeditepe University, Istanbul 34755, Turkey

International Journal of Financial Engineering (IJFE), 2016, vol. 03, issue 04, 1-19

Abstract: Wavelet coherence of time series provide valuable information about dynamic correlation and its impact on time scales. Here we analyze the wavelet coherence of FTSE100 and S&P 500 with selected Asian markets of S&P/ASX 200 (Australia), S&P/ASX200 A-REIT (Australia), BIST (Turkey), HIS (Hong Kong), IDX (Indonesia), KLSE (Malaysia), KOSPI (Korea), N225 (Japan), RTS (Russia), Shenzhen (China), 0050.TW (Taiwan). Wavelet coherence results revealed interconnected relationships between stock markets and how these relationships vary in the time–frequency space. We conclude that developed economy stock markets have strong influences over Asian stock markets, although market dependencies vary by country and change over time. We also suggested that because co-movements shift over time, short term and middle term diversification could be more beneficial taking into account the degree of interrelations. From investors point of view, these relationships provides beneficial information, especially for portfolio diversification and risk elimination.

Keywords: Asian stock markets; co-movement; wavelet coherence (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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DOI: 10.1142/S242478631650033X

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