Asia-Pacific Stock Markets Research Articles

Transmission of Volatility across Asia-Pacific Stock Markets: Is There a Pattern?

The present study attempts to track the transmission of volatility across 11 international stock markets in the Asia-Pacific region over a period of 20 years, which includes both crisis (i.e., contagion form) and non-crisis periods. It also investigates whether the global transmission of volatility follows a pattern. The study contributes to the literature in two ways: (a) it provides a historical map of volatility transmission in the Asia-Pacific region and (b) it identifies the path and pattern of volatility spillover across stock markets in the Asia-Pacific region.

Asia-Pacific Stock Market Integration: New Evidence by Incorporating Regime Changes

ABSTRACTThis work provides new evidence of Asia-Pacific stock market integration by incorporating the regime changes of each stock market through the smooth transition autoregressive (STAR) model. According to empirical results, most Asia-Pacific stock market returns follow STAR dynamics to a significant degree with more rapid and frequent regime changes of a shorter nature compared with G7 markets. A series of STAR-based Granger causality tests reveal evidence of stronger equity market integration compared with linear Granger causality tests. We also find that Asia-Pacific stock markets are integrated in different levels. Finally, we provide evidence that in the early twenty-first century the influence of China and the United States on Asia-Pacific stock markets has been maintained while that of Japan has been weakened.

The Impact of Subprime Crisis on Asia-Pacific Islamic Stock Markets

The objective of this study is to examine the impact of the U.S. subprime crisis on the long-term and short-term dynamic relationships between selected Asia-Pacific Islamic stock markets and conventional stock markets in the region. The comovements among these stock markets are examined through cointegration tests, and vector error correction model–based Granger causality tests, for the period from February 2006 to December 2010. The study reveals that, after the debut of the U.S. subprime crisis, Asia-Pacific Islamic stock markets increasingly integrated among themselves and with their conventional counterparts. In addition, the conventional markets of the United States and Japan significantly influence the short-run fluctuations of Asia-Pacific Islamic and conventional markets.

Transmission of Volatility Across Asia-Pacific Stock Markets: Is There a Pattern?

In finance literature, volatility is synonymous with the measure of risk. Spillover of volatility refers to the transmission of disturbances or shock from one market to another and has direct consequence on resource allocation, risk hedging, and even, monetary policies. Spillover between stock markets has been the subject of study since 1990s where researchers have studied the nature of time-varying correlations between international stock markets. Extant literature substantiates the fact that volatility spillover between international stock markets happens at all times and that developed nations, particularly the US, is the major source of spillover. However, studies involving emerging markets, specifically in the Asia-Pacific region is scarce. Moreover, a clear understanding regarding the pattern of volatility transmission across international stock markets is lacking. The present study attempts to track the transmission of volatility across 11 international stock markets in the Asia-Pacific region over a span of 20 years, which include both crises (i.e. contagion form) and non-crisis periods. It also investigates whether global transmission of volatility follow a pattern. Our study contributes to the literature in two ways: (1) It provides a historical map of volatility transmission in the Asia-Pacific region; and (2) this study identifies the path and pattern of volatility spillover across Asia-Pacific stock markets.

Dynamic spanning trees in stock market networks: The case of Asia-Pacific

This article proposes a new procedure to evaluate Asia Pacific stock market interconnections using a dynamic setting. Dynamic spanning trees (DST) are constructed using an ARMA–FIEGARCH–cDCC process. The main results show that: 1. the DST significantly shrinks over time; 2. Hong Kong is found to be the key financial market; 3. the DST has a significantly increased stability in the last few years; 4. the removal of the key player has two effects: there is no clear key market any longer and the stability of the DST significantly decreases. These results are important for the design of policies that help develop stock markets and for academics and practitioners.

Modelling dynamic dependence between crude oil prices and Asia-Pacific stock market returns

This paper investigates the dynamic dependence between crude oil prices and stock markets in ten countries across the Asia-Pacific region during the period from January 4, 2000 to March 30, 2012 by using unconditional and conditional copula models. The model is implemented using an AR (p)-GARCH (1, 1)-t model for the marginal distributions and constant and time-varying copulas for the joint distribution. The results show that the dependence between crude oil prices and Asia-Pacific stock market returns is generally weak, that it was positive before the global financial crisis, except in Hong Kong, and that it increased significantly in the aftermath of the crisis. The lower tail dependence between oil prices and Asia-Pacific stock markets exceeds that of the upper tail dependence, except in Japan and Singapore in the post-crisis period. Moreover, we show that time-varying copulas best capture the tail dependence and that taking the tail correlation into account leads to improved accuracy of VaR estimates. These findings have important implications for investors interested in Asia-Pacific markets for portfolio diversification, risk management, and international asset allocation.

Co-movement of Asia-Pacific with European and US stock market returns: A cross-time-frequency analysis

We investigate the co-movement of 13 Asia-Pacific stock market returns with that of European and US stock market returns using the wavelet coherence method. Our results show consistent co-movement between most of the Asia-Pacific stock markets and that of Europe and the US in the long run. We also uncover evidence of a wide variation in co-movement across the time scale of the financial crises. The co-movement dynamics of the Asia-Pacific markets with that of Europe and the US are different during the two financial crises. The difference in the co-movement dynamics could be the result of the different natures of the financial crises or a change in regime.

Time-shift asymmetric correlation analysis of global stock markets

The time-shift asymmetric correlation analysis method is introduced for stock exchanges with different but non-overlapping trading hours to analyze the degree of global integration between stock markets of different countries and their influence on each other. Next-day correlation (NDC) and same-day correlation (SDC) coefficients are introduced. Correlations between major U.S. and Asia-Pacific stock market indices are analyzed. Most NDCs are statistically significant while most SDCs are insignificant. NDCs grow over time and the U.S. stock market plays a pacemaking role for the Asia-Pacific region. The correlation coefficients can be used as a measure of the degree of globalization for the corresponding countries.

Momentum in Asia Pacific Stock Markets

Momentum in Asia Pacific Stock Markets

An Empirical Analysis of Linear and Non-Linear Dependence of Stock Prices and Trading Volume in Asia Pacific Stock Market

This paper examines the casual dependence of price changes and trading volume by using linear and nonlinear models for Australia, India, Japan, New Zealand and Taiwan stock exchange from January 1, 2005 to December 31, 2008. The empirical methods used include Unit-root tests, Granger causality tests and MA (5) GARCH (1,1). Granger Causality test demonstrates that for some countries, returns cause volume and volumes cause returns. The evidence indicates stronger evidence of returns causing volume than volume causing returns. The results present a significant relationship between trading volume and the value of price changes, the exogenous variable contributes some information to the return and volatility series for capturing the potential non-linear dependence of stock and trading volume in conditional variance to determine the contemporaneous and lagged volume effect after incorporation. Moreover, the findings suggest that the presence of current and past returns, trading volume adds some predictive power for future returns in these countries.

The Spillover Effects of Target Interest Rate News from the U.S. Fed and the European Central Bank on the Asia-Pacific Stock Markets

This paper examines the spillover effects of the U.S. Fed’s and the European Central Bank (ECB)’s target interest rate news on the market returns and return volatilities of twelve stock markets in the Asia-Pacific region over the period 1999-2006. The news spillover effects on the returns are generally consistent with the literature where a majority of stock markets shows significant negative returns in response to unexpected rate rises. Whilst the results of the speed of adjustment for the Fed’s news are mixed, the ECB news was absorbed slowly, in general. The return volatilities were higher in response to the interest rate news from the both sources. In addition, both the Fed and the ECB news elicited delayed or persisting volatility responses.

Seasonality in the Asia Pacific stock markets

This paper examines the issue of stock market seasonality in the Asia Pacific stock market. Using the most recent set of data, the paper employs the GARCH(1,1) and GARCH(1,1)-M models to study the day-of-the-week, month-of-the-year, monthly and holiday effects in ten Asia Pacific countries, namely Australia, China, Hong Kong, Japan, India, Indonesia, Malaysia, Singapore, South Korea and Taiwan. Overall, evidence to support the presence of day-of-the-week effect is documented in five countries, month-of-the-year effect is detected in eight countries, monthly effect is reported in six countries and holiday effect is found in four countries. In most cases, the calendar effects cannot be associated with conditional risk. This study shows that stock market seasonality is a global phenomenon, and it continues to persist today. Although the presence of seasonality implies a lack of informational efficiency in the respective stock market, this study does not refute the validity of the Efficient Market Hypothesis, as the presence of significant returns is not tantamount to abnormal profits. Further studies are necessary to ensure that stock market seasonality can yield significant returns in excess of transaction costs.

An Empirical Study of Cointegration and Causality in the Asia-Pacific Stock Markets

The primary aim of this study is to examine both the integration hypothesis and the short- and long-term dynamic causal linkage in the Asia-Pacific region. Employing recently advanced unit root and cointegration techniques that accommodate structural breaks and GARCH effects, this analysis will provide not only an indication of the direction of interaction but a quantitative assessment of the degree of interdependence among specific markets, in particular the intra-regional impact in Asia-Pacific. Our empirical results suggest that Asia-Pacific stock market indices are highly integrated, and the stock market crash in 1987, as well as the Asian financial crises had a statistically significant impact on the long-term relations among Asian emerging stock markets.

On Risk and Return in Asia-Pacific Stock Markets

ABSTRACT This study evaluates the recent performance of stocks of major industry groups in the Asia-Pacific region. The objective of the study is to guide international investors who are exploring the possibility of investing in this region but are unsure of which specific industries to invest in. Risk-adjusted stock returns (expressed in U.S. dollars) are calculated for each industry group and sub-group in the region. Based on stock performance, recommendations are made for inclusion of specific industries in an Asia-Pacific investment portfolio.