scholarly journals Asymmetric Impact of Financial Integration to International Nonsynchronous Trading Effects in Developed and Emerging Equity Markets

2014 ◽  
Vol 04 (07) ◽  
pp. 517-525
Author(s):  
KiHoon Jimmy Hong
Keyword(s):  
Financial Integration ◽  
Equity Markets ◽  
Asymmetric Impact ◽  
Nonsynchronous Trading

scholarly journals Financial Integration in the GCC Region: Market Size Versus National Effects

2019 ◽  
Vol 31 (2) ◽  
pp. 309-316
Author(s):  
Kerim Peren Arin ◽  
Guglielmo Maria Caporale ◽  
Kyriacos Kyriacou ◽  
Nicola Spagnolo
Keyword(s):  
Financial Integration ◽  
Important Determinant ◽  
Equity Markets ◽  
Spillover Effects ◽  
Abu Dhabi ◽  
Stock Exchanges ◽  
Market Size ◽  
Market Capitalization ◽  
The Mean ◽  
Oil Crisis

AbstractThis paper examines financial spillovers between the four largest equity markets (by market capitalization) in the GCC region using a VAR-GARCH (1,1) framework that sheds light on interdependence as well as the effects of the 2014 oil crisis. Since the UAE is a federation including two stock exchanges (Abu Dhabi and Dubai), it is possible to test whether being part of a federal union matters more than market size in terms of financial integration. Our results suggest that the latter is more important, since we could not find evidence of stronger linkages between the Abu Dhabi and Dubai markets compared to those between other markets in the region. By contrast, there are significant spillover effects, both in the mean and in the volatility, from the largest market of Saudi Arabia to Qatar and the two markets in the UAE, which confirms that market capitalization is a more important determinant of financial integration than belonging to a federal union. Further, spillovers from the larger markets have become stronger as a result of the 2014 oil crisis. Finally, there is also evidence of spillovers from the smaller to the larger markets.

Integration between East and Southeast Asian equity markets

2015 ◽  
Vol 7 (2) ◽  
pp. 104-121 ◽  
Author(s):  
Nuruzzaman Arsyad
Keyword(s):  
Southeast Asia ◽  
Financial Crises ◽  
Market Integration ◽  
Financial Integration ◽  
Equity Markets ◽  
Equity Market ◽  
Southeast Asian ◽  
Asian Countries ◽  
Content Type ◽  
East And Southeast Asia

Purpose – This paper aims to seek to find answers to three questions. First, is there any possibility of long-term cointegration between East and Southeast Asian equity markets? If so, how many cointegrating equations are there? Second, what are the short-term causal relationships between equity markets in East and Southeast Asia? Third, what is the East Asia’s most influential equity market toward their Southeast counterparts, and vice versa? Design/methodology/approach – This study uses Johansen's (1988) cointegration method to test long-run relationships among East and Southeast Asian equity markets. With regards to short-run causal relationships, this study uses Granger-causality test as well as the forecast variance decomposition method. Findings – Johansen test proves that there is cointegration between East and Southeast Asian equity markets, but the integration process is not complete. Cointegrating vector also provides evidence that member countries of ASEAN+3 respond differently to external shocks. With regards to short-run causal direction, this study finds that Japan Granger-causes all equity markets in Southeast Asia, while Singapore and Vietnam Granger-cause all equity markets in East Asia. These results imply that Japan is the market with most linkages in Southeast Asia, while Singapore and Vietnam are the markets with most linkages to East Asia. Furthermore, forecast variance decomposition reveals that Japan is the East Asia’s most influential equity markets, while Singapore is the most influential equity market in Southeast Asia. This study suggests that policymakers in East and Southeast Asian countries to synchronize the capital market standards and regulations as well as to reduce the barriers for capital mobility to spur the regional equity market integration. Research limitations/implications – Increasing integration of East and Southeast Asian capital markets forces policymakers in ASEAN+3 countries to synchronize monetary policies, as it has been found that regionally integrated capital markets reduce the degree of independent monetary policy (Logue et al., 1976). It is therefore important for policymakers in East and Southeast Asian countries to assess the possibility of stock market integration within this region to anticipate the future risks associated with economic integration as well as to build collective regional institutions (Wang, 2004). Click and Plummer (2005) also argued that integrated stock markets is more efficient than nationally segmented equity markets, and the efficiency of Asian capital markets has been questioned in particular after the 1997 Asian financial crises. Yet, the empirical evidence on the extent of financial integration among ASEAN+3 member countries has been limited and inconclusive. This study is therefore an attempt to investigate the recent development of ASEAN+3 equity markets integration. Practical implications – This study focuses its attention on the existence and the extent of financial integration in East and Southeast Asia region, and it provides evidence that equity market integration in ASEAN+3 is far from complete, and for that reason, there is a need for policymakers in ASEAN+3 member countries to synchronize their standards and regulations. Furthermore, the policymakers in East and Southeast Asia can gain benefit from this study, as it provides the evidence that ASEAN+3 member countries respond differently to policy shocks, which may hinder the development of regional financial integration as well as the policy effectiveness of region-wide authority in ASEAN+3. Originality/value – This research is different from previous studies, as it puts the regional financial integration within the context of ASEAN+3 frameworks. Unlike previous research that considers East and Southeast Asian countries as an individual entity, this research considers East and Southeast Asia into two different blocks, following Tourk (2004) who documented that negotiation process for ASEAN+3 financial integration is conducted in sub-regional level (ASEAN vs East Asia), rather than national level (country per country basis). Second, this study covers the period after the 1997 Asian financial crisis. As suggested in Wang (2014), that the degree of stock market integration tends to change around the periods marked by financial crises, the updated study on Asian financial integration in the aftermath of 1997 financial crises is important to document the development of regional financial integration.

Financial integration and diversification benefits: China and ASEAN4 countries

2016 ◽  
Vol 42 (5) ◽  
pp. 496-514 ◽  
Author(s):  
Tung Dao Nguyen ◽  
Pana Elisabeta
Keyword(s):  
Financial Integration ◽  
Equity Markets ◽  
Investment Strategy ◽  
Moderate Level ◽  
Strategic Partnership ◽  
Future Research ◽  
Financial Contagion ◽  
Content Type ◽  
Cross Country ◽  
The Difference

Purpose – The strategic partnership between China and ASEAN has resulted in significant financial reforms at the country and regional level. The scale and pace of these changes call for systematic assessments of their bearing on the development and integration of financial markets in this region. The purpose of this paper is to investigate the level of financial integration of the equity markets in China and ASEAN4 countries (Indonesia, Malaysia, Philippines, and Thailand) for the period 2004-2014. Design/methodology/approach – The authors use the β and σ convergence, dynamic conditional correlation, and wavelet correlation to assess the degree, trend, and change across different time scales of the integration of China-ASEAN4 equity markets. Using two measures of change in return per unit risk and variance, we assess the difference in diversification benefits between an equity portfolio China-ASEAN4 and China-EU. Findings – The authors find that financial integration across China-ASEAN4 equity markets fluctuated between a moderate level before and after the recent crisis and a higher level during the crisis. The results indicate that investors achieve higher diversification benefits from a cross-industry than a cross-country investment strategy within this region. Research limitations/implications – Future research should investigate whether local factors and existing cultural and political differences explain the weak to moderate level of integration of China and emerging ASEAN equity markets. Practical implications – A good understanding of the degree and evolution of the regional financial integration may be used by investors to allocate capital efficiently when adding ASEAN4 equities to a portfolio of Chinese equities. Social implications – Systematic assessments of the regional financial integration contribute to the effort to mitigate the ensuing cross-border financial contagion during crises. Originality/value – The authors argue that that the increase in correlations of CHINA-ASEAN4 equity markets during the recent crisis does not reflect a permanent shift in the dynamic of the dominant markets in the region. While investors achieve higher diversification benefits from a cross-industry than a cross-country investment strategy within this region, the diversification benefits are lower for long-term than short-term investors.

Assessing Financial Integration of BRICS Equity Markets: An Empirical Analysis

2017 ◽  
Vol 3 (2) ◽  
pp. 127-138 ◽  
Author(s):  
J. Vineesh Prakash ◽  
D. K. Nauriyal ◽  
Sandeep Kaur
Keyword(s):  
South Africa ◽  
Granger Causality ◽  
Financial Integration ◽  
Equity Markets ◽  
Granger Causality Test ◽  
Causality Test ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Johansen Cointegration Test

This article examines the degree of financial integration among the equity markets of Brazil, Russia, India, China, and South Africa (BRICS) by using monthly data collected for the period 2005–2014. The study employs Johansen cointegration test, vector error correction model (VECM), and Granger causality test which confirm the existence of relationship in the short and long run among the equity markets of BRICS. Further results exhibit that there exists cointegration or a long-run relationship among the equity markets, but weak cointegration, though the results of Granger causality test do not display existence of any causality among market pairs such as China–Brazil, Russia–Brazil, South Africa–Brazil, Russia–China, and South Africa–India. The results indicate that even though the financial integration among the equity markets of BRICS is on ascendance, it is yet incomplete. This work suggests harmonization of laws, regulations, and operations based on international principles and appropriate regulatory supervision among BRICS nations in order to minimize the risk of financial integration, besides further relaxing restrictions on capital account for expedited financial integration.

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