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

Kihoon Jimmy Hong

doi:10.4236/tel.2014.47065

Abstract

This paper investigates the impact of the international equity market integration to the international nonsynchronous trading effects (INTE). The paper finds that the financial market integration would increase INTE, in general, and the impact monotonically decreases over the lag length. However empirical evidence suggests that the increase is asymmetric among developed and emerging markets. Further theoretical investigation reveals that the level of volatility and autocorrelation are positively related to the increase in INTE. The paper concludes that the relatively higher level of volatility and autocorrelation in emerging markets could mitigate the increase in INTE from financial market integration.

Highlights

This paper investigates the impact of financial equity market integration to international nonsynchronous trading effects (INTE)
This study shows that nonsynchronous trading effects may be affected by the degree of financial market integration
The paper finds that the financial market integration would increase the effect, in general, and the impact monotonically decreases over the lag length

Summary

Introduction

This paper investigates the impact of financial equity market integration to international nonsynchronous trading effects (INTE). The contributions are clear: First it provides a theoretical framework to investigate the nonsynchronous trading effect. It theoretically and empirically investigates the effect of equity market integration to INTE. (2014) Asymmetric Impact of Financial Integration to International Nonsynchronous Trading Effects in Developed and Emerging Equity Markets. The paper finds the theoretical and empirical evidences that more integrated equity markets increases the INTE. Schotman and Zalewska [5] address the issue of nonsynchronous trading associated with financial market integration. The current paper intends to expand the scope of Schotman and Zalewska [5] and investigate the relationship between the equity market integration and INTE.

The Model

Data and Measures

Empirical Result

3.29 IBOVESPA

Conclusion