Stocks Market Interdependence and Asian Financial Crisis: Empirical Evidence from Asean-Plus-Three

This paper examines the impact of Asian financial crisis on stock market interdependence for the period of 16 years from January 1991 to December 2006 of ASEAN-plus-three stock markets. The preliminary results show that there is differential in risk-return behavior for pre-, during and post-crisi...

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Main Authors: Ruzita Abdul Rahim, Ros Zamzam Sapian, Abu Hassan Shaari Mohd Nor
Format: Article
Language:English
Published: Universiti Sains Islam Malaysia 2012
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Online Access:http://ddms.usim.edu.my/handle/123456789/5358
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spelling my.usim-53582015-03-02T06:28:00Z Stocks Market Interdependence and Asian Financial Crisis: Empirical Evidence from Asean-Plus-Three Ruzita Abdul Rahim Ros Zamzam Sapian Abu Hassan Shaari Mohd Nor Stock market interdependence Asian financial crisis International portfolio diversification ASEAN-plus-three This paper examines the impact of Asian financial crisis on stock market interdependence for the period of 16 years from January 1991 to December 2006 of ASEAN-plus-three stock markets. The preliminary results show that there is differential in risk-return behavior for pre-, during and post-crisis period. The adverse impact of the Asian financial crisis is clearly evident by the sharp decreases in average returns, coupled with sharp increases in return volatility. The results of the eight-market vector autoregressive analyses indicate that on a country-by-country basis, it is Thailand and Korea that apparently play the dominant role of influencing the stock market interdependence. This is rather surprising given the importance of Japan as one of the world's most advanced markets and the primary source of foreign funds for the other Asian markets. Overall, the results of this study lend strong evidence to support current conception that an exogenous shock like the Asian financial crisis is capable of increasing the levels of stock market interdependence. More importantly, this study proves that such a change is only temporary. The implication of these findings on investors in the ASEAN-plus-three markets is that even though there are some losses in risk reduction benefits of international portfolio diversification due to increased integration, the impact is not permanent. Once the markets recover from the crisis and regain their tranquil conditions, the level of stock market interdependence drops to their pre-crisis level. As a result, these markets will once again become the primary choice for international portfolio investors. 2012-02-28T06:22:54Z 2012-02-28T06:22:54Z 2008 Article 1823075X http://ddms.usim.edu.my/handle/123456789/5358 en vol.5 no.1 2008; Universiti Sains Islam Malaysia
institution Universiti Sains Islam Malaysia
building USIM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universit Sains Islam i Malaysia
content_source USIM Institutional Repository
url_provider http://ddms.usim.edu.my/
language English
topic Stock market interdependence
Asian financial crisis
International portfolio diversification
ASEAN-plus-three
spellingShingle Stock market interdependence
Asian financial crisis
International portfolio diversification
ASEAN-plus-three
Ruzita Abdul Rahim
Ros Zamzam Sapian
Abu Hassan Shaari Mohd Nor
Stocks Market Interdependence and Asian Financial Crisis: Empirical Evidence from Asean-Plus-Three
description This paper examines the impact of Asian financial crisis on stock market interdependence for the period of 16 years from January 1991 to December 2006 of ASEAN-plus-three stock markets. The preliminary results show that there is differential in risk-return behavior for pre-, during and post-crisis period. The adverse impact of the Asian financial crisis is clearly evident by the sharp decreases in average returns, coupled with sharp increases in return volatility. The results of the eight-market vector autoregressive analyses indicate that on a country-by-country basis, it is Thailand and Korea that apparently play the dominant role of influencing the stock market interdependence. This is rather surprising given the importance of Japan as one of the world's most advanced markets and the primary source of foreign funds for the other Asian markets. Overall, the results of this study lend strong evidence to support current conception that an exogenous shock like the Asian financial crisis is capable of increasing the levels of stock market interdependence. More importantly, this study proves that such a change is only temporary. The implication of these findings on investors in the ASEAN-plus-three markets is that even though there are some losses in risk reduction benefits of international portfolio diversification due to increased integration, the impact is not permanent. Once the markets recover from the crisis and regain their tranquil conditions, the level of stock market interdependence drops to their pre-crisis level. As a result, these markets will once again become the primary choice for international portfolio investors.
format Article
author Ruzita Abdul Rahim
Ros Zamzam Sapian
Abu Hassan Shaari Mohd Nor
author_facet Ruzita Abdul Rahim
Ros Zamzam Sapian
Abu Hassan Shaari Mohd Nor
author_sort Ruzita Abdul Rahim
title Stocks Market Interdependence and Asian Financial Crisis: Empirical Evidence from Asean-Plus-Three
title_short Stocks Market Interdependence and Asian Financial Crisis: Empirical Evidence from Asean-Plus-Three
title_full Stocks Market Interdependence and Asian Financial Crisis: Empirical Evidence from Asean-Plus-Three
title_fullStr Stocks Market Interdependence and Asian Financial Crisis: Empirical Evidence from Asean-Plus-Three
title_full_unstemmed Stocks Market Interdependence and Asian Financial Crisis: Empirical Evidence from Asean-Plus-Three
title_sort stocks market interdependence and asian financial crisis: empirical evidence from asean-plus-three
publisher Universiti Sains Islam Malaysia
publishDate 2012
url http://ddms.usim.edu.my/handle/123456789/5358
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score 13.036727