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Financial Integration Through Equity Markets and the Role of Exchange Rate: Evidence from ASEAN-5 Countries

Author

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  • Hawati Janor

    (School of Business Management, Faculty of Economy and Business, Universiti Kebangsaan Malaysia, Bangi, Selangor, Malaysia)

  • Ruhani Ali

    (School of Management, Universiti Sains Malaysia, 11800 USM Pulau Pinang, Malaysia)

  • Roselee Shah Shaharudin

    (School of Management, Universiti Sains Malaysia, 11800 USM Pulau Pinang, Malaysia)

Abstract

This study explores equity market integration for five major ASEAN countries: Malaysia, Singapore, Thailand, Philippines and Indonesia. The motivation emanated from the fact that these countries have been implementing financial reforms in their attempt to promote economic efficiency. By applying the bivariate and multivariate cointegration techniques we test whether ASEAN-5 stock markets are globally or regionally integrated. For the global markets, the study focus on the role of the US, Japan and world market. The importance of exchange rate on the integration is examined under the multivariate framework. The study also address the possible impact of 1997 Asian financial crisis on the integration. While the findings revealed that some of these markets are regionally and globally integrated, the integration however is not fully complete, thus reflect some diversification benefits in these markets. The study also support previous findings that documented evidence on the increasing influence of Japan on ASEAN countries relative to the US. The study also shows significant impact of the financial crisis and provide evidence on the importance of exchange rate on the integration.

Suggested Citation

  • Hawati Janor & Ruhani Ali & Roselee Shah Shaharudin, 2007. "Financial Integration Through Equity Markets and the Role of Exchange Rate: Evidence from ASEAN-5 Countries," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 3(1), pages 77-92.
    • Handle: RePEc:usm:journl:aamjaf00301_77-92
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    Cited by:

    1. Ugur Ergun & Abu Hassan Shaari Mohd Nor, 2010. "The Stock Market Relationship between Turkey and the United States under Unionisation," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 6(2), pages 19-33.
    2. Nattawoot Koowattanatianchai & Kulkunya Prayarach, 2016. "How the ASEAN Exchanges integration affects firms' position on the ASEAN Link and abnormal returns: evidence from Thailand," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(1), pages 58-82.
    3. Rajneesh Prakash Verma & Poonam Rani, 2016. "Emerging Stock Market Integration in the Post Financial Crises Era: An Empirical Analysis of the Short-term and Long-term Linkages," Emerging Economy Studies, International Management Institute, vol. 2(1), pages 91-109, May.
    4. Ranjan Dasgupta, 2016. "International Portfolio Diversification - Role of Emerging Economies-US Integration and Dynamic Linkages: An Empirical Study," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(6), pages 100-100, June.
    5. Jorge Andrés Muñoz Mendoza & Carmen Lissette Veloso Ramos & Sandra María Sepúlveda Yelpo & Carlos Leandro Delgado Fuentealba & Edinson Edgardo Cornejo Saavedra, 2022. "Exchange Markets and Stock Markets Integration in Latin-America," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 17(3), pages 1-24, Julio - S.

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