Analyzing Financial Integration in East Asia through Fractional Cointegration in Volatilities

Gilles de Truchis and Benjamin Keddad ()

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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: co-persistence; integrated volatility; East Asian stock markets; financial integration; fractional cointegration (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-lam, nep-ltv, nep-neu and 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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