TY - JOUR
T1 - Dynamics of integration in East Asian equity markets
AU - Komatsubara, Tadaaki
AU - Okimoto, Tatsuyoshi
AU - Tatsumi, Ken ichi
N1 - Publisher Copyright:
© 2017 Elsevier Inc.
PY - 2017/9
Y1 - 2017/9
N2 - This paper investigates the dynamics of integration in East Asian equity markets between 1995 and 2013 using a smooth-transition correlation GARCH model. Our results show that East Asian equity market integration among China and other countries has increased significantly since 2007, whereas among other East Asian equity markets excluding China increased significantly in an earlier period from 1999 to 2001. Additionally, we find that increasing integration has been mostly caused by correlation increases in after-trading hours. These results suggest that stock prices in East Asia are sensitive to Europe and US stocks because Europe and US investors are actively investing in East Asian stocks. Indeed, the periods reflect striking increases in integration that correspond approximately to the start of intensive Europe and US investment activity in East Asian stock markets.
AB - This paper investigates the dynamics of integration in East Asian equity markets between 1995 and 2013 using a smooth-transition correlation GARCH model. Our results show that East Asian equity market integration among China and other countries has increased significantly since 2007, whereas among other East Asian equity markets excluding China increased significantly in an earlier period from 1999 to 2001. Additionally, we find that increasing integration has been mostly caused by correlation increases in after-trading hours. These results suggest that stock prices in East Asia are sensitive to Europe and US stocks because Europe and US investors are actively investing in East Asian stocks. Indeed, the periods reflect striking increases in integration that correspond approximately to the start of intensive Europe and US investment activity in East Asian stock markets.
KW - Diversification effect
KW - Financial integration
KW - Smooth transition model
KW - Stock market linkages
UR - http://www.scopus.com/inward/record.url?scp=85026415009&partnerID=8YFLogxK
U2 - 10.1016/j.jjie.2017.07.002
DO - 10.1016/j.jjie.2017.07.002
M3 - Article
SN - 0889-1583
VL - 45
SP - 37
EP - 50
JO - Journal of the Japanese and International Economies
JF - Journal of the Japanese and International Economies
ER -