Long‐term trends and cycles in ASEAN stock markets

Abstract

AbstractThe objective of this study is to analyze the degree of long‐term and short‐term co‐movements in the stock markets of five ASEAN countries and to shed some light on the long‐term and short‐term market efficiency/inefficiency in the region. We observe a long‐run relationship among the stock markets of Indonesia, Malaysia, Singapore, and Thailand, but the Philippine market does not share this relationship. Thus, four cointegrated markets reveal long‐term market inefficiency in the region but the Philippine market can be considered efficient. Next, given that the four indices are cointegrated, the number of common cycles are investigated in these markets and each stock index series is decomposed into its trend and cyclical components. The trend–cycle decomposition reveals that in the short‐run four ASEAN markets can be categorized into two efficient groups, i.e., Malaysian and Singaporean markets in one group and Indonesian and Thai markets in the other. However, the markets within each group are inefficient.