Cointegration of Stock Markets in East Asia in the Boom and Early Crisis Period

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 four 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 five major stock exchanges in East Asia, i.e Shangai Stock Exchange, Tokyo Stock Exchange, Osaka Stock Exchange, Hong-Kong Stock Exchange and Korean Stock Exchange. It employs the recently developed techniques for investigating unit roots, co-integration, time-varying volatility, and causality in variance

Number of Pages in PDF File: 12

Keywords: Stock markets, Co-integration, East Asia

JEL Classification: G15

working papers series