Time Varying Asian Stock Market Integration

Abstract

We employ an asset pricing framework with varying estimation lengths to show that there has been an increasing degree of integration between Asian and international stock markets, but very little with Japan. This finding is consistent with prior studies and highlights the impact of recent regulatory and economic reform undertaken throughout the region. Our results show that instability in the asset variance structure underpins the observed varying degrees of financial market integration. In particular, modeling integration using shorter estimation periods helps explain the time varying nature of financial market integration and the benefits that may accrue to international and domestic investors.

Measuring market integration during crisis periods

“…In order to establish whether integration has increased over time we regress the unconditional R squared for each category on a time trend. Table 10 supports the view of increasing market integration over the period 1973 to 2017, consistent with Bekaert, et al (2007), Carrieri, et al (2007), Batten, et al (2015, Bekaert and Mehl (2019) and others. Both measures of R squared show that market integration increases with time but only gradually.…”

Do Nonparametric Measures of Extreme Equity Risk Change the Parametric Ordinal Ranking? Evidence from Asia

“…Most studies on equities risk in Asia surrounding crisis periods have focused on integration between Asian and non-Asian markets and whether this integration changes between crisis and non-crisis periods (for example, Click and Plummer 2005;Chiang et al 2007;Chuang et al 2007;Yang et al 2010;Brown et al 2014;Batten et al 2015;Rejeb and Arfaoui 2016), rather than focusing on differences in ordinal rankings between metrics such as we do in this study. Regarding industry risk, studies have generally focused on which industries over the periods have been more affected (for example, Baur 2012; Kenourgios and Dimitriou 2015) rather than on differences between metrics as undertaken in this study.…”

A Systemic Contribution and Vulnerability of Non-financial Firms: A Cross Industry Analysis

“…The rising development in size and the relative significance of the developing markets in Asia may lead to a heightened probability of interconnectedness and contagion. This, in turn, may result in a greater degree of risk transmission across borders and an elevated level of systemic risk (Batten et al, 2015;Shen, 2018;Wang, 2014). Secondly, this study employs two widely used systemic risk measures, ΔCoVaR and MES to obtain the two-dimensional results.…”