Global and regional integration of ASEAN stock market

다국어 초록 (Multilingual Abstract)

This study investigates the dynamics of stock market integration in the ASEAN. The paper employed the dynamic risk decomposition model by developing and extending the methodological framework of Akdogan (1996, 1997) and Barari (2004) to reflect the time-varying evolution of market integration process. In particular, the paper examined the stock market movements of the integrated stock market of ASEAN (or ASEAN Economic Community, AEC) for the sample period between January 1st, 2000 and December 31st, 2013.
The primary findings of this study are as follows. First, the integrated stock market of ASEAN is more integrated with global stock market relative to regional stock market. Second, there is much higher level of unsystematic risk relative to systematic risk, indicating that the integrated stock market of ASEAN is independent from the external stock market movements. Third, however, there is a strong tendency for the level of integration in the integrated stock market of ASEAN to be affected by the macroeconomic shocks, suggesting that the market is vulnerable to financial turbulence. Nevertheless, the overall results imply that constructing a portfolio with the integrated stock market of ASEAN would facilitate more portfolio efficiency.
In addition, the paper explored the same analysis for the stock market of China, which is specified as the regional market for the ASEAN in this study. The results exhibit a key notable feature. The stock market of China is resilient to external impulses. The level of stock market integration in China was altered dramatically only at the onset of the crisis, signifying that the market rapidly absorbs and dissolves the macroeconomic shocks.
In all, the international investors will be able to significantly reduce the portfolio unsystematic risk by adding a market portfolio of the integrated stock market of ASEAN in their existing portfolios. As for the ASEAN, it will be better off in a world where there is a robust economic linkage with China. It will be able to ensure the resilience to external shocks by reinforcing and stabilizing the market in case of financial crisis. In turn, it will be able to ignite the economic growth engine by attracting the foreign capital.

목차 (Table of Contents)

• Page
• List of Tables & Figures ii
• Abstract iii
• I. Introduction 1
• II. Literature Review 5
• III. Methodology 10
• IV. Empirical Analysis 15
• V. Conclusion 26
• References 28