Analysis of Stock Market Integration Among ASEAN Countries by Using Vector Error Correction Model (VECM) Approach

Abstract

Globalization has driven the economy of countries to relate to each other. It brings relationships in the capital among countries in the world, especially in ASEAN region countries. This study aimed to analyze the integration of the stock market among countries in the ASEAN region. The stock market was analyzed are the Indonesia Stock Exchange, Malaysia Stock Exchange, Singapore Stock Exchange, Thailand Stock Exchange, Vietnam Stock Exchange, and Philippine Stock Exchange. This study using the Vector Error Correction Model (VECM) as the method. The result of this study shows that, in the long term Singapore Stock Index (STI), Malaysia Stock Index (KLSE), Philippines (PSEi), and Indonesia Stock Index (JKSE) are positively correlated. This means the change of stock index price in one country will affect other related countries in the long term. In the short term of VECM estimation, found the Vietnam Stock Index (VNI), Singapore Stock Exchange (STI), Philippine (PSEi) are positively correlated and negatively correlated with Thailand Stock Exchange (SET). For the managerial implication, the result of this study is expected as a reference or basis of consideration of investment decisions. This because long-term stock market movements are important because they impact international portfolio management and risk diversification.