Abstract
Stock market, is one of the most important financial market which has a close relationship with a country’s economy, due to which it is often called the barometer of the economy. Over the past 25 years, the stock markets have been affected by different global economic shocks. Various researchers have analyzed different aspects of these effects one by one, however, this study is an assessment of stock market interrelationship of emeriging Asian economies which include most of the East Asian, and Southeast Asian emerging economies with special focus on China for past decades during which different crisis occurred. We used Morgan Stanley capital international (MSCI) daily indices data for each stock market and compared Chinese stock market with the stock markets of India, Pakistan, Malaysia, Singapore, and Indonesia. We analyzed the data through the individual wavelet power spectrum, cross-wavelet transform and wavelet coherence, to determine the correlation and volatility among the selected stock markets. These model have the power to analyze co-movements among these countries with respect to both frequency and time spaces. Our findings show that there are co-movement patterns of higher frequencies during the crises periods of 1997, 2008 and 2015. The dependency strength among the considered economies is noted to increase in the crisis periods, which implies increased short- and long-term benefits for the investors. From a financial point of view, it has been determined that the co-movement strength among the emerging economies of Asia may have an effect on the VaR (Value at Risk) levels of a multi-country portfolio. Furthermore, the stock market of China shows a high correlation with the other six Asian stock emerging markets in both high and low-frequency spectrums. The association of the south and east Asian stock market with Chinese stock markets show the interconnection of these economies with the economy of China since past two decades. These findings are useful for investors, portfolio managers and the policymaker around the globe.
Highlights
The stock market is one of the major components of the financial market which is interconnected to the real economic operations
Besides the individual researchers the global economic and monitory institutions like the International Monetary Fund (IMF), Banks for International Settlements (BIS), Financial Stability Board (FSB) and other regulatory authorities have studied the nexus of the international stock markets with the standpoint of the systemic risk which was underestimated across the board before the crisis
We collected The daily data of Morgan Stanley capital international (MSCI) indices market data over a period of 27 years including the period of global economic crisis period. we selected the stock markets of China, India, Pakistan, Malaysia, Singapore and Indonesia
Summary
The stock market is one of the major components of the financial market which is interconnected to the real economic operations. Besides the individual researchers the global economic and monitory institutions like the International Monetary Fund (IMF), Banks for International Settlements (BIS), Financial Stability Board (FSB) and other regulatory authorities have studied the nexus of the international stock markets with the standpoint of the systemic risk which was underestimated across the board before the crisis. These studies unanimously found the disorder in the local markets as the initial cause of the crisis, which leads to market excess in the volatility and extreme interconnection between the stock markets [7]. There is an increase in the studies on the emerging market in a quest of diversification opportunities among the emerging markets
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
