Asian Stock Markets Research Articles

Asian stock market integration after the global financial crisis: an ARDL bound testing approach

PurposeThe Global recession of 2008 was the worst financial crisis in the postworld war economic history that brought in severe disruptions in global investments and capital flows. Not surprisingly, research interest in the field of market integration has considerably increased over the last decade. This paper analyses the dynamics of price integration among Asian financial markets during the postfinancial crisis period.Design/methodology/approachWe employ an Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration and a Granger Causality/Block Exogeniety test from a Vector Error Correction Model (VECM) on monthly stock index data of five leading Asian economies from April 2009 to March 2020.FindingsThe cointegration results could not produce any conclusive evidence of long-run relations between stock markets. There exists weak price convergence among markets, and financial integration is partial and in an imperfect form.Research limitations/implicationsStock price performance in China is closely “coupled” with that in India, but both markets appear to be the short-run predictors of Asian stock returns. The research uses only the benchmark stock indices of the selected economies. Consideration of mid-cap and small-cap segments where foreign investments are significant today can validate the findings further.Practical implicationsThe asymmetric pattern of price behavior of Asian markets has important implications for the pricing efficiency of national markets and offers arbitrage potentials for global investors to optimize returns through market diversifications on a long-term perspective. The finding definitely will be a great help to investors who are potentially interested in a trading strategy that offers greater returns with limited exposure to market risks.Originality/valueCompared with previous studies, the research uses the most recent data of leading Asian markets and applies the robust method of ARDL Bounds testing approach that allows us to understand better if the economic recoveries and advancement have had an effect on market coupling and stock price transmissions.

The Impact of North Korea’s Nuclear Tests on Asian Stock Markets

This study investigates the impact of North Korea’s nuclear tests on Asian stock markets. Two approaches are used separately in order to identify how stock market returns and volatilities change immediately after the nuclear tests. We find that the Chinese stock market tends to be more sensitive to unexpected shocks from North Korea’s nuclear tests than other Asian stock markets. However, relatively, the Japanese stock market is little influenced by the nuclear tests though Japan is not only geographically close to North Korea but also politically vigilant to North Korea’s nuclear threats. Also, we find that strengthened return correlations (linearity) do not necessarily increase stock return volatilities.

The Impact of COVID-19 on Stock Return in Asian Stock Markets Evidences from Developed, Emerging and Frontier Asian Markets

The study focuses on the impact of COVID-19 on stock market in Asian region highlighting the impact on stock returns of 15 Asian stock markets while observing the relationship between confirmed COVID-19 cases and stock return. In this regard, daily closing price indices during the period of 1st January 2019 and 30th June 2020 were collected. The impact of COVID-19 on stock returns were analysed using Event Study method by comparing the calculated abnormal return before and after the event day (20th of January, 2020) under two evet windows such as (0,10) and (10, 20). Apart from that, OLS based panel regression analysis was carried out to observe the impact of the number of COVID-19 confirmed cases on stock return in selected stock markets. The empirical analysis reveals that abnormal returns after the event day were negative and therefore it is apparent that the COVID-19 outbreak has drastically affected the stock returns of selected stock markets of the Asian region. Specifically, two event windows indicates that COVID-19 has an immediate negative impact on all selected stock markets while long term negative impact has limited to emerging and frontier markets. Moreover, it is observed that COVID-19 confirmed cases negatively affect the stock return of all selected stock markets in Asian region. Hence, the current study recommends the importance of recovering from the pandemic and sustaining appropriate environment for the development and smooth running of stock markets.

Gold against Asian Stock Markets during the COVID-19 Outbreak

This study examines the safe-haven and hedging roles of gold against thirteen Asian stock markets during the COVID-19 outbreak. During the COVID-19 sub-period, gold is shown to be a strong hedge (diversifier) for the majority (minority) of Asian stock markets; it exhibits the property of a strong safe-haven in China, Indonesia, Singapore, and Vietnam, and a weak safe-haven in Pakistan and Thailand. The optimal weights of all stock-gold portfolios are lower during the COVID-19 sub-period than the pre COVID-19 sub-period, suggesting that portfolio investors should increase their investment in gold during the COVID-19 sub-period. The hedging effectiveness for most Asian stock markets is higher during the COVID-19 sub-period. Further analyses show that the hedge portfolio returns in many cases are mostly driven by gold implied volatility and inflation expectations in both sub-periods. Our findings have useful implications for market participants holding investments in Asian stocks during stressful periods.

Through the Lens of Recession 2.0: Diversification Dynamics Between the Leading Asian Stock Markets

The focus of this article is to analyse the inter-linkages between eight leading stock markets in Asian continent from the period of July 2011 to February 2018. This period holds relevance as this was the time when Recession 2.0 set in, which adversely affected the developed economies; however, the developing economies withstood the crisis without much of an impact. Co-integration and Granger causality tests were conducted to probe the inter-linkages. Study revealed a positive impact on Asian stock market indices collectively on each of the indexes. The highest number of unidirectional causalities was to KOPSI and NIFTY from rest of the stock indices. Results confirmed that no co-integration relationship existed among the selected indices indicating favourable diversification opportunities. Thus, the study fosters global market participants and policymakers to consider the nitty-gritties of stock market integration so as to benefit from international stock market diversification in the Asian region.

Linkages between gold and emerging Asian stock markets: New evidence from the Chinese stock market crash

This study examines the return and volatility transmission between gold and nine emerging Asian Stock Markets during the global financial crisis and the Chinese stock market crash. We use the VAR-AGARCH model to estimate return and volatility spillovers over the period from January 2000 through June 30, 2018. The results reveal the substantial return and volatility spillovers between the gold and emerging Asian stock markets during the global financial crisis and the Chinese stock market crash. However, these return and volatility transmissions vary across the pairs of stock markets and the financial crises. Besides, we analyze the optimal portfolios and hedge ratios between gold and emerging Asian stock markets during all sample periods. Our findings have important implications for effective hedging and diversification strategies, asset pricing and risk management.

Linkages between gold and emerging Asian stock markets: New evidence from the Chinese stock market crash

This study examines the return and volatility transmission between gold and nine emerging Asian Stock Markets during the global financial crisis and the Chinese stock market crash. We use the VAR-AGARCH model to estimate return and volatility spillovers over the period from January 2000 through June 30, 2018. The results reveal the substantial return and volatility spillovers between the gold and emerging Asian stock markets during the global financial crisis and the Chinese stock market crash. However, these return and volatility transmissions vary across the pairs of stock markets and the financial crises. Besides, we analyze the optimal portfolios and hedge ratios between gold and emerging Asian stock markets during all sample periods. Our findings have important implications for effective hedging and diversification strategies, asset pricing and risk management.

The nexus between oil price and stock market: Evidence from South Asia

We examine the interactive link between oil prices and the stock market in the 4 selected South Asian countries using a Nonlinear Autoregressive Distributed Lag (NARDL) model for 1997–2018. We find a positive relationship between the world oil price and stock market index, and the response of the stock market index to positive and negative oil price shocks is asymmetric. Our results further reveal that higher oil prices in the world market stimulate stock price, suggesting that the South Asian countries do not follow the Efficient Market Hypothesis (EMH). We recommend that the policymakers take initiatives to make the South Asian stock market more efficient by removing the barriers to stock market development, developing the country’s infrastructure, enhancing the stock market’s capacity, and restoring the confidence of the market participants within the region.

Empirical Evidence of Dynamic Conditional Correlation Between Asian Stock Markets and US Stock Indexes During COVID-19 Pandemic

This study aims to explore the dynamic conditional correlation (DCC) between ten Asian stock indexes, the US stock index, and Bitcoin by using the dynamic conditional correlation model. The time span of the daily data is between January 2015 to May 2021, the total observation is 1,116. DCC(1,1)-EGARCH(1,1) with multivariate t and normal distributions for the DCC and EGARCH models, respectively, outperforms other models by the goodness of fit values. Except for Bitcoin, we discovered that the majority of the securities' volatilities have a very high volatility persistence. Furthermore, the negative shocks/news have more impact on the volatilities than positive shocks/news in most of the cases, except the stock index of China and Bitcoin. Most of the correlation pairs exhibit higher correlation during the COVID-19 pandemic compared to the pre-COVID-19, except Hong Kong-The US and Malaysia-Indonesia. Moreover, the correlation between Asian stock indexes during the COVID-19 pandemic is statistically higher than the pre-COVID-19 pandemic. However, there are a few instances where the Hong Kong stock index and a few countries are identical. The result of correlation size shows the connectedness between Asian stock markets, which are well-connected within the region, especially with South Korea, Singapore, and Hong Kong.

Asymmetric Risk Spillovers Between China and ASEAN Stock Markets

This study attempts to investigate the interdependence and risk spillover effects between China and ASEAN-6 stock markets by using the Copula-TV-GARCH-CoVaR model and the MES model covering the period from January 04, 2010 to April 30, 2021. The results indicate that these stock markets, except the Vietnam stock market, experience a dependency structure. The pair of China and Singapore exhibited the highest dependence structure, whereas Vietnam was least likely to have dependence structures with China stock market. Upside and downside CoVaRs are symmetric and display similar temporal dynamics throughout the sample period for all the series. Moreover, the values of upside CoVaRs are systematically above the upside VaRs for all markets in the sample periods, while the values of downside CoVaRs are systematically below the downside VaRs. The MES and $\Delta $ CoVaRs are significantly positive and varied from one market to another, which indicates that there are bidirectional asymmetric risk spillover effects between China and the ASEAN-6 stock markets. Furthermore, the pairs of risk spillover between China and ASEAN stock markets identified using MES and $\Delta $ CoVaR may not be identical. Our results indicate that international portfolio managers and policymakers should consider the existence of asymmetric risk spillover effects between China and the ASEAN countries.

Stock Market Vulnerability to the COVID-19 Pandemic: Evidence from Emerging Asian Stock Market

This paper studies empirically the emerging Asian stock market vulnerability to pandemics. Taking the Covid-19 virus as a case study, we used the ARDL panel data approach to investigate the impact of the daily Covid-19 confirmed cases along with a behavioral component based on a triggering fear event related to news about Covid-19 deaths. The results indicate that both the reported daily growth of Covid-19 confirmed cases along with the triggering fear event related to news about death, affected the Asian stock markets performance negatively, other variables such as oil price, gold price, exchange rates, and the US stock market were also found to be determinants of the Asian stock markets during the studied period.

Portfolio Diversification Benefits in Southeast Asian Stock Markets for Turkish Investors

This study is a pioneering attempt at investigating portfolio diversification benefits available to the Turkish conventional and Shari’ah-compliant investors in the Southeast Asian conventional and Islamic stock markets at different investment horizons. We use multivariate-generalized autoregressive conditional heteroscedastic (MGARCH-DCC) and wavelet approaches. The results suggest that the Malaysian stock market offers substantial diversification benefits for the Turkish conventional and Islamic investors, especially for the short-run investment horizons up to 16 days, as well as for long-term investment periods exceeding 128 days. In addition, Turkish conventional investors could also consider investing in Thailand Islamic equities in short-run holding periods up to 16 days. As for the medium investment horizons from 16 to 128 days, it is advisable for the Turkish investors to avoid investing in all the equities because of very low diversification benefits.

The COVID-19 IMPACT on the ASIAN STOCK MARKETS

In this note, we examine the impact that the COVID-19 crisis may have on the Asian stock markets by examining the statistical properties of three financial markets in Asia: namely, the Korean SE Kospi Index, the Japanese Nikkei 225, and the Chinese Shanghai Shenzhen CSI 300 Index. Using fractional integration methods, the results based on daily data indicate that mean reversion and thus transitory effects of shocks occur in the Nikkei 225 index. However, for the Kospi and Shanghai Shenzhen indices, this hypothesis is rejected, implying that shocks are permanent.

Stock market comovements among Asian emerging economies: A wavelet-based approach.

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.

The Effect of WHO COVID-19 Announcement on Asian Stock Markets Returns: An Event Study Analysis

This study aims to examine the effect of World Health Organization (WHO) declaring COVID-19 as a global pandemic on the stock market returns of the five largest Asian stock markets using event study analysis. Results obtained from this research shows that the WHO announcement had a significant negative effect on stock markets returns on major Asian stock markets.

Does US-China Trade War Matter on ASEAN Stock Market: Event-study Approach

The trade war between the US and China by imposing tariffs has the potential to affect global financial stability. As the largest economy in the world, the US and China had been trading goods and services globally. Then, when these countries have retaliated, the tariff war will affect the global supply chain, international trade, economy, and the stock market. This research examined the effect of the US-China trade war on ASEAN stock prices using an event-study approach. The result shows that the ASEAN stock market has positive abnormal returns during pre-event period (12%). In contrast, ASEAN stock markets shifted to negative abnormal return (-7.4%) in the short-term window, indicating that the stock market is efficient. Stock price reflects the information from the market quickly. However, the impact of the trade war on the ASEAN stock market is insignificant.

An Empirical Analysis of the Volatility Spillover Effect between World-Leading and the Asian Stock Markets: Implications for Portfolio Management

This study employs the Vector Autoregressive-Generalized Autoregressive Conditional Heteroskedasticity (VAR-AGARCH) model to examine both return and volatility spillovers from the USA (developed) and China (Emerging) towards eight emerging Asian stock markets during the full sample period, the US financial crisis, and the Chinese Stock market crash. We also calculate the optimal weights and hedge ratios for the stock portfolios. Our results reveal that both return and volatility transmissions vary across the pairs of stock markets and the financial crises. More specifically, return spillover was observed from the US and China to the Asian stock markets during the US financial crisis and the Chinese stock market crash, and the volatility was transmitted from the USA to the majority of the Asian stock markets during the Chinese stock market crash. Additionally, volatility was transmitted from China to the majority of the Asian stock markets during the US financial crisis. The weights of American stocks in the Asia-US portfolios were found to be higher during the Chinese stock market crash than in the US financial crisis. For the majority of the Asia-China portfolios, the optimal weights of the Chinese stocks were almost equal during the Chinese stock market crash and the US financial crisis. Regarding hedge ratios, fewer US stocks were required to minimize the risk for Asian stock investors during the US financial crisis. In contrast, fewer Chinese stocks were needed to minimize the risk for Asian stock investors during the Chinese stock market crash. This study provides useful information to institutional investors, portfolio managers, and policymakers regarding optimal asset allocation and risk management.

Co-Integration and Contagion Effect in Republic of Tiongkok and Asean Stock Market during The Economic Slowdown in Republic of Tiongkok

This study aims to find empirical evidence of the relationship of co-integration and contagion effect on the stock market in the People's Republic of Tiongkok and ASEAN during economic slowdown in the People's Republic of Tiongkok in 2015-2017. The samples in this study were the stock market of the People's Republic of Tiongkok, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The data used in the study are secondary data from the Composite Stock Price Index obtained from www.bloomberg.com. The research method used in this study is Vector Autoregression (VAR). The test results show that economic slowdown in the People's Republic of Tiongkok has no effect on the average JCI of the People's Republic of Tiongkok and ASEAN. There is co-integration in the average JCI of the People's Republic of Tiongkok and ASEAN. The average Indonesian JCI is not affected by the JCI average of the People's Republic of Tiongkok and ASEAN. There is contagion effect on the average JCI of the People's Republic of Tiongkok and ASEAN. Based on the results of the study it were concluded that co-integration and contagion effects occurs on the average JCI in the People's Republic of Tiongkok and ASEAN when economic slowdown occurs.

Volatility Dynamics and Jump of Asian Stock Markets

본 연구에서는 아시아 7개국(한국, 중국, 일본, 싱가포르, 인도, 인도네시아, 말레이시아) 주가지수의 변동성 다이나믹스를 확산모형과 점프-확산 모형을 이용해 분석하였다. 본 연구에서 제시하는 표본기간동안의 실증분석 결과에 따르면, 순수 확산모형에서는 확산모수들이 상태변화에 민감하게 추정될 때 모형들의 적합도가 높았으며, 점프 요소가 포함될 경우 확산모형의 적합도가 더욱 향상되는 것으로 나타났다. 또한 상태 의존성이 큰 모형과 추세 부분에 주기(cycle)를 포함시킬 경우에도 적합도가 개선된다는 사실을 발견하였으며, 한국, 중국, 싱가포르, 인도, 말레이시아는 추세에 시간가변적인 특성을 반영시킬 때 주가지수에 대한 설명력이 향상되었다. 이러한 결과들은 아시아 주식시장에 단기적으로 큰 충격을 유발할 수 있는 급등락 위험이 내재되어 있기 때문에 순수 확산모형보다는 점프 요소가 추가된 확산모형이 아시아 주가지수 변동성의 다이나믹스 구현에 적합하다는 것을 의미한다.

The role of information and communication technology (internet penetration) on Asian stock market efficiency: Evidence from quantile‐on‐quantile cointegration and causality approach

AbstractThe objective of the study is to evaluate the long‐run and causal relationship between information and communication technology (ICT) and Asian stock market efficiency by using quantile‐on‐quantile cointegration and causality approach, which analysed the different slope coefficients at median and the lower tails of conditional quantiles distribution. The study selected 10 Asian countries that experienced massive capital flows and e‐financing to verify efficient market hypothesis. The study utilizing a monthly time series data ranging from 2000 M01 to 2016 M12, where pre‐ and post‐global financial crisis time period is certainly induced, which affected through trade and financial channels in many Asian countries. The results confirmed the positive linkages between stock market efficiency and internet use in the 8 Asian countries while this result is averted in the two Asian countries (i.e., China and Russia) in a given time period. The heterogeneity between the countries in the stock‐ICT nexus could be endorsed to the multiple factors that need to be included in the multivariate framework.