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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information


Journal:
Business and Economics Research Journal
Title of Article: Co-movements of and Linkages between Asian Stock Markets
Author(s): Ilhan Meric, Joe H. Kim, Linguo Gong, Gulser Meric
Volume: 3
Number: 1
Year: 2012
Page: 1-15
ISSN: 1309-2448 

Abstract

International marketers may be interested in stock market linkages for various reasons: the co-movements of equity prices appear to reflect not only market globalization but also the globalization of capital resources. The co-movements can affect the balancing strategies of country market portfolios as they indicate opportunities and risks. The strategic choice of alternative market presence, such as market entry via export marketing or a full ownership and marketing may need to match with the type of financial resources. The co-movements of and the linkages between the U.S. stock market and Asian stock markets have been studied extensively. However, little attention has been given to the co-movements of Asian stock markets and the lead/lag linkages between them. In this paper, we study this issue with the principal components analysis (PCA) and Granger-causality (G-C) statistical techniques. We find that the contemporaneous co-movements of Asian stock markets have become closer and portfolio diversification benefits with Asian stock markets have diminished over time during the January 1, 2001-January 1, 2011 period. We find that the Singapore, Indian, and Japanese stock markets are the most influential stock markets and the Philippine and South Korean stock markets are the least influential stock markets in Asia. The Japanese, Singapore, and New Zealand stock markets are the least affected stock markets and the Shanghai, Australian, and South Korean stock markets are the most affected stock markets by the movements in the other Asian stock markets.

Keywords: Asian stock markets, Co-movements of stock markets, Linkages between stock markets, Principal components analysis, Granger causality

JEL Classification: G11, G15

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