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Stock market linkages between the ASEAN countries, China and the US: a fractional integration/cointegration approach

Stock market linkages between the ASEAN countries, China and the US: a fractional integration/cointegration approach

Caporale, Guglielmo Maria, Gil-Alana, Luis A. and You, Kefei ORCID: 0000-0001-7253-5838 (2021) Stock market linkages between the ASEAN countries, China and the US: a fractional integration/cointegration approach. Emerging Markets Finance and Trade. ISSN 1540-496X (Print), 1558-0938 (Online) (In Press) (doi:https://doi.org/10.1080/1540496X.2021.1898366)

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Abstract

This paper examines stock market integration between the five ASEAN countries and both the US and China in turn, over the period from November 2002 to August 2020. The linkages between both aggregate and financial sector stock indices (both weekly and monthly) are analysed using fractional integration and fractional cointegration methods. Further, recursive cointegration analysis is carried out for the weekly series to study the impact of the 2007-8 global financial crisis and the 2015 China stock market crash on the pattern of stock market co-movement. The main findings are the following. All stock indices exhibit long-range dependence. There is cointegration between the five ASEAN countries and the US but almost none between the former and China, except between Indonesia and China in the case of the financial sector. The 2007-8 global financial crisis and the 2015 Chinese stock market plunge weakened the linkages between the ASEAN five and both China and the US. The implications of these results for market participants and policy makers are discussed.

Item Type: Article
Uncontrolled Keywords: Asian stock markets, financial integration, fractional integration, fractional cointegration
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Centre for Governance, Risk & Accountability (CGRA)
Last Modified: 13 Apr 2021 10:35
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: None
URI: http://gala.gre.ac.uk/id/eprint/31379

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