Co-integration and Causality Among Jakarta Stock Exchange, Singapore Stock Exchange, and Kuala Lumpur Stock Exchange

Erie Febrian and Aldrin Herwany

MPRA Paper from University Library of Munich, Germany

Abstract: For both risk management and portfolio selection purposes, modeling the linkage across financial markets is crucial, especially among neighboring stock markets. In investigating the dependence or co-movement of three or more stock markets in different countries, researchers frequently use co-integration and causality analysis. Nevertheless, they conducted the causality in mean tests but not the causality in variance tests. This paper examines the co-integration and causal relations among three major stock exchanges in Southeast Asia, i.e Jakarta Stock Exchange, Singapore Stock Exchange, and Kuala Lumpur Stock Exchange. It employs the recently developed techniques for investigating unit roots, co-integration, time-varying volatility, and causality in variance. For estimating market risk of portfolio, this paper employs Value-at-Risk with delta-normal approach.

Keywords: Risk Management; Causality; Co-integration; Stock Markets (search for similar items in EconPapers)
JEL-codes: D53 G1 (search for similar items in EconPapers)
Date: 2007-10-15
New Economics Papers: this item is included in nep-fmk, nep-rmg and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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