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Volatility Co-movement of ASEAN-5 Equity Markets

Swee-Ling Oh, Evan Lau (), Chin-Hong Puah () and Shazali Abu Mansor

MPRA Paper from University Library of Munich, Germany

Abstract: Purpose – Economic cross-linkages and the increased co-movement of asset prices across international markets are important outcomes as the result of globalization. Hereby, the nature of international stock markets and the extent to which the 1997-1998 East Asian turmoil had affected the market relationship of five countries of Association of Southeast Asian Nations (ASEAN-5) remain as probing questions. Design/methodology/approach – We resort to the standard time series econometrics analysis. These include the unit root, cointegration and the Granger causality tests. Hereby, further empirical analyzes is conducted upon two sub-periods of interest: (1) pre-crisis period from 1987:1 to 1997:7 and (2) post-crisis period from 1997:8 to 2007:12. This is to allow for possible transitional motion leading to and departing from the crisis. Findings – Using an array of econometrics analysis upon the stock price volatility series, we found partial market integration for the pre-crisis; whereas in the post-crisis, complete integration prevails. Hence, the financial meltdown in 1997 is said to be a contagion led crisis as markets integrate well off after the crisis than prior to it. Nonetheless, long run portfolio asset diversification benefits across the ASEAN-5 basin are reduced as markets are integrated in both the pre- and post-crisis. Originality/value – The paper is of value by showing to uncover the issue of interdependence of stock market integration focusing on the ASEAN-5 economies. The formation of the ASEAN Investment Area (AIA- 1998) parallel with the establishment of a developed ASEAN Index-Financial Times Stock Exchange (FTSE) regional index is viable to foster deeper regional market convergence.

Keywords: ASEAN-5; Portfolio Diversification; Volatility co-movement (search for similar items in EconPapers)
JEL-codes: C32 G15 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk, nep-mic and nep-sea
Date: 2010-04-03
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Journal Article: Volatility Co-Movement of Asean-5 Equity Markets (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:22244

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