Asian Economic Integration and Stock Market Comovement
Luc A. Soenen
California State Polytechnic University, San Luis Obispo
University of San Diego - School of Business Administration
Journal of Financial Research
Using daily returns from 1988 to 1998, we investigate to what degree twelve equity markets in Asia are integrated with Japan's equity market and examine the factors that affect the level of economic integration. We find that the equity markets of Australia, China, Hong Kong, Malaysia, New Zealand and Singapore are highly integrated with the stock market in Japan. There is also evidence for these Asian markets to become more integrated over time, especially since 1994. A higher import share as well as a greater differential in inflation rates, real interest rates and gross domestic product growth rates have negative effects on stock market comovements between country pairs. Conversely, increased export share by Asian economies to Japan and greater foreign direct investment from Japan to other Asian economies contribute to greater comovement.
JEL Classification: F36, G15, F02, F15Accepted Paper Series
Date posted: February 1, 2001
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