Exploring the Dynamic Interdependence among the East Asian Stock Markets

Suthawan Prukumpai and Yuthana Sethapramote

from ToKnowPress

Abstract: Stock market interdependence has strong implication for risk diversification. Recent empirical evidence suggests that correlations between international stock markets increase during period of financial turmoil. This paper investigates the development of stock market integration in East Asia using Dynamic Conditional Correlation GARCH (DCC-GARCH) model of Engle (2002). Weekly data from January 1991 to December 2011 are used in this study. The results show that there are time-varying patterns in both volatility and correlation among the East Asian stock markets. Further, the significant evidence of positive trend in the cross-country conditional correlations is found. Particularly, such correlations increase during the periods of high market volatilities when risk diversification is needed most. These show that the East Asian stock markets are more integrated during the past decade. Therefore, regulators, prospect investors, and fund managers should pay attention in volatility transmission between markets together with the limitations of international diversification during financial crisis.

Keywords: Financial interdependence; East Asian Economies; DCC-GARCH (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.toknowpress.net/ISBN/978-961-6914-07-9/papers/S2_257-278.pdf full text (application/pdf)

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:tkp:tiim13:s2_257-278

Access Statistics for this chapter

More chapters in Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management from ToKnowPress
Bibliographic data for series maintained by Maks Jezovnik ().