Asian Economic Integration and Stock Market Comovement

Posted: 1 Feb 2001

See all articles by Luc A. Soenen

Luc A. Soenen

California State Polytechnic University, San Luis Obispo

Robert Johnson

University of San Diego - School of Business Administration

Abstract

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, F15

Suggested Citation

Soenen, Luc A. and Johnson, Robert, Asian Economic Integration and Stock Market Comovement. Journal of Financial Research. Available at SSRN: https://ssrn.com/abstract=253292

Luc A. Soenen (Contact Author)

California State Polytechnic University, San Luis Obispo ( email )

College of Business, Dept. of Finance
Bldg #003, Business Room #448
San Luis Obispo, CA 93407
United States
805-756-2821 (Phone)
805-756-1473 (Fax)

Robert Johnson

University of San Diego - School of Business Administration ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States
619-260-4849 (Phone)

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