The Impact of Structural Breaks on the Integration of the Asean-5 Stock Markets

22 Pages Posted: 28 May 2009

See all articles by Cathy W. S. Chen

Cathy W. S. Chen

Feng Chia University - Department of Statistics; Graduate Institute of Statistics & Actuarial Science, Feng Chia University

Richard H. Gerlach

University of Sydney

Nick Ying-Pin Cheng

Vanung University - Department of Finance

Yung-Lieh Yang

Ling Tung University-Department of Finance

Date Written: May 27, 2009

Abstract

This paper examines the ASEAN-5 countries and explores the impact of structural breaks on the level of financial integration in that region. An extended cointegration procedure allowing for three types of structural break, is employed and compared with the standard Johansen procedure, for daily and weekly returns. The empirical results suggest a higher level of integration within the ASEAN-5 markets than previously found, suggesting that financial risk reduction benefits from diversifying investments across the region are less than previously thought. Further, Singapore and Thailand are the main long-term drivers in the region; Malaysia and Indonesia are more short-term drivers. Structural breaks are found to correspond with the Asian financial crisis in 1997/98 and a possible Y2K effect in late 1999. Results are verified using another structural break model and method, where break dates are treated as known.

Keywords: cointegration, rank, structural break, Asian financial crisis, stock market.

JEL Classification: C12, C22, C32, F36, G15

Suggested Citation

Chen, Cathy W. S. and Gerlach, Richard H. and Cheng, Nick Ying-Pin and Yang, Yung-Lieh, The Impact of Structural Breaks on the Integration of the Asean-5 Stock Markets (May 27, 2009). Available at SSRN: https://ssrn.com/abstract=1410605 or http://dx.doi.org/10.2139/ssrn.1410605

Cathy W. S. Chen

Feng Chia University - Department of Statistics ( email )

100 Wen Hwa Road
Taichung, 407
Taiwan
886 4 24517250 ext 4412 (Phone)
886 4 24517092 (Fax)

HOME PAGE: http://myweb.fcu.edu.tw/~chenws/

Graduate Institute of Statistics & Actuarial Science, Feng Chia University

100 Wenhwa Road
Talchung
Taiwan
886 4-24517250 ext 4412 (Phone)
886 4-2517092 (Fax)

HOME PAGE: http://myweb.fcu.edu.tw/~chenws/

Richard H. Gerlach (Contact Author)

University of Sydney ( email )

Room 483, Building H04
University of Sydney
Sydney, NSW 2006
Australia
+ 612 9351 3944 (Phone)
+ 612 9351 6409 (Fax)

HOME PAGE: http://www.econ.usyd.edu.au/staff/richardg

Nick Ying-Pin Cheng

Vanung University - Department of Finance ( email )

1, Van-Nung Rd., Chung-Li
Taoyuan, 32061
Taiwan

Yung-Lieh Yang

Ling Tung University-Department of Finance ( email )

1 Lingtun Rd, Nantun, Taichung 408, Taiwan
Taichung, 408
Taiwan

Register to save articles to
your library

Register

Paper statistics

Downloads
113
Abstract Views
808
rank
245,561
PlumX Metrics