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Co-movements of and Linkages between Asian Stock Markets

Author

Listed:
  • Meric , Ilhan

    (Rider University)

  • Kim, Joe H.

    (Rider University)

  • Gong, Linguo

    (Rider University)

  • Meric, Gulser

    (Rowan University)

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.

Suggested Citation

  • Meric , Ilhan & Kim, Joe H. & Gong, Linguo & Meric, Gulser, 2012. "Co-movements of and Linkages between Asian Stock Markets," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 3(1), pages 1-1, January.
  • Handle: RePEc:ris:buecrj:0071
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    Citations

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    Cited by:

    1. Yutaka Kurihara, 2016. "Effectiveness of the Zero Interest Rate Policy for Financial Markets in Japan: Principal Components Analysis," Applied Economics and Finance, Redfame publishing, vol. 3(3), pages 103-111, August.
    2. Yutaka Kurihara, 2016. "Deterministic Elements of Japanese Stock Prices under Low Interest Rates," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(2), pages 24-30, April.
    3. Muhammad Hanif & Ariba Sabah, 2020. "Stock Markets’ Integration in Post Financial Crisis Era: Evidence from Literature," Capital Markets Review, Malaysian Finance Association, vol. 28(2), pages 43-71.
    4. Nevi Danila & Bunyamin & Ahmad Djalaluddin & Yudha Fathony, 2023. "Do Foreign Fund Flows Influence the Stock Market Index? Evidence From Indonesia," SAGE Open, , vol. 13(4), pages 21582440231, October.

    More about this item

    Keywords

    Asian stock markets; Co-movements of stock markets; Linkages between stock markets; Principal components analysis; Granger causality;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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