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Global and Regional Financial Integration in Emerging Asia: Evidence from Stock Markets

Author

Listed:
  • Caporale, Guglielmo Maria

    (Brunel University London)

  • Gil-Alana, Luis A.

    (University of Navarra)

  • You, Kefei

    (University of Greenwich)

Abstract

This paper investigates if financial markets in emerging Asia have become more globally or regionally integrated since the Asian financial crisis in the late 1990s. It employs a price-based measure of integration, namely, stock return differentials, between 10 emerging Asian economies and the United Stated (US) (as an indicator of global integration), as well as Japan and the Asian region (as two alternative indicators of regional integration), to test for mean reversion and draw inferences regarding financial integration. This paper makes a three-fold contribution to the literature. It uses not only aggregate but also industry-level data on stock returns, it examines the impact of the 2008 crisis, and it adopts a more general fractional integration approach. The evidence suggests that in emerging Asia, on both the aggregate and industry (especially for the financial sector) levels, there is more regional than global integration, and that the former became even stronger during the post-2008 crisis period. Furthermore, Japan’s influence has been declining and the Chinese stock market has become more integrated, both regionally and globally.

Suggested Citation

  • Caporale, Guglielmo Maria & Gil-Alana, Luis A. & You, Kefei, 2021. "Global and Regional Financial Integration in Emerging Asia: Evidence from Stock Markets," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 36(2), pages 185-202.
    • Handle: RePEc:ris:integr:0824
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    More about this item

    Keywords

    Global and regional integration; Asian stock markets; Fractional integration; Global financial crisis;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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