COMOVEMENT OF ASIA-PACIFIC AND MAJOR STOCK MARKETS
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This paper investigates the comovement ofAsia-Pac(fic and major stock markets (a total ofseven developed as well as emerging markets) with the cointegation test and error-correction modeling, using daily market index data from January 1988 to April 1992. Similar to previous studies, all markets show the presence of unit roots for non-stationarity (efficient market in the weak sense). Appearing in the system is only one cointegrating vector- o ne linear combination ofthe seven market indices constituting a stable interrelationship. However, when the equilib- rium relationship is employed, the resultant models exhibit a stronger tendency toward autoregressivity than the error-corrective representation. The results seem to indicate that Asia-Pacific and major stock markets are neither completely integrated nor entirely segmented and thus warrant investors utili-::,ation of an international capital market divers(fication strategy.
Abstract
This paper investigates the comovement ofAsia-Pac(fic and major stock markets (a total ofseven developed as well as emerging markets) with the cointegation test and error-correction modeling, using daily market index data from January 1988 to April 1992. Similar to previous studies, all markets show the presence of unit roots for non-stationarity (efficient market in the weak sense). Appearing in the system is only one cointegrating vector- o ne linear combination ofthe seven market indices constituting a stable interrelationship. However, when the equilib- rium relationship is employed, the resultant models exhibit a stronger tendency toward autoregressivity than the error-corrective representation. The results seem to indicate that Asia-Pacific and major stock markets are neither completely integrated nor entirely segmented and thus warrant investors utili-::,ation of an international capital market divers(fication strategy.