Analyzing Financial Integration in East Asia through Fractional Cointegration in Volatilities

Gilles de Truchis and Benjamin Keddad ()

No 1346, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: Two integrated financial markets are generally subjected to common shocks revealing that commonalities in fundamentals drive the underlying return processes. In such a case, volatilities should share a long-run component although their transitory components might temporary diverge. Accordingly, we investigate financial integration in East Asian by analyzing the co-persistent nature of their integrated volatilities. Using recent fractional cointegration techniques, we find that volatilities of several markets converge in long-run to a common stochastic equilibrium. Our results reveal that a global integration process drives the most developed markets of the region, while no evidence of co-persistence appears between emerging markets.

Keywords: integrated volatility; co-persistence; Fractional cointegration; East Asian stock markets; financial integration. (search for similar items in EconPapers)
Pages: 19 pages
Date: 2013-09, Revised 2013-09
New Economics Papers: this item is included in nep-sea
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Related works:
Working Paper: Analyzing Financial Integration in East Asia through Fractional Cointegration in Volatilities (2014)
Working Paper: Analyzing Financial Integration in East Asia through Fractional Cointegration in Volatilities (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1346

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