Abstract
Efforts to improve financial integration that continue to be implemented after the implementation of the Asean Economic Community 2015 agreement, can encourage increased integration of capital markets in countries within the region. This study was conducted to investigate the spillover of volatility between stock markets that accompanied the ongoing efforts of financial integration carried out by ASEAN member countries. Investigation of volatility spillover is done by applying Exponential GARCH method on time series daily data of stock return of ASEAN-5 countries period September 2016 - December 20, 2017. If previous studies found significant spillover of volatility from Singapore, Malaysia, Thailand and Philippines, the results of this study show that only Singapore's stock exchanges consistently have a significant impact on the Indonesian stock market. The turmoil in the Singapore stock market will be consistently transmitted to the Indonesian stock market. However, efforts to improve the financial integration carried out by ASEAN member countries have not consistently caused the turmoil in Malaysia, Thailand and the Philippines stock exchange to be transmitted to the Indonesian stock market.
Highlights
In the implementation of the process of economic integration, at the end of November 2015, the leaders of ASEAN countries signed a new document "ASEAN 2025: Forging Ahead Together" whose contents are the targets to be achieved by ASEAN in the 10 years to realize the integration of the ASEAN region more tight and open
These findings indicate that in the area of the economy in the ASEAN region, the Indonesian stock market is consistently affected by the turmoil that occurs in the Singapore stock exchange
The significance of volatility transmission from the Singapore stock exchange to the Indonesian stock exchanges shown in Table 2, in line with the results of a study conducted by Saadah (2013), and Lestano (2010)
Summary
In the implementation of the process of economic integration, at the end of November 2015, the leaders of ASEAN countries signed a new document "ASEAN 2025: Forging Ahead Together" whose contents are the targets to be achieved by ASEAN in the 10 years to realize the integration of the ASEAN region more tight and open. This target marks a new round of liberalization negotiations among ASEAN members, including the goal of ASEAN financial services liberalization.
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