Rui Dias – Escola Superior de Ciรชncias Empresarias – Institute Polytechnic of Setรบbal, Portugal & CEFAGE, University
of รvora, Portugal
Paula Heliodoro – Escola Superior de Ciรชncias Empresarias โ Institute Polytechnic of Setรบbal, Portugal
Paulo Alexandre – Escola Superior de Ciรชncias Empresarias โ Institute Polytechnic of Setรบbal, Portugal
Cristina Vasco – IEFP โ Instituto do Emprego e Formaรงรฃo Profissional, Alcรกcer do Sal, Portugal
DOI: https://doi.org/10.31410/EMAN.2020.17
4th International Scientific Conference – EMAN 2020 – Economics and Management: How to Cope With Disrupted Times, Online/Virtual, September 3, 2020, CONFERENCE PROCEEDINGS published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia; ISBN 978-86-80194-30-1,ย ISSN 2683-4510
Abstract:
The main objective of this research is to estimate whether portfolio diversification is feasible
in the financial markets of Indonesia, Malaysia, Philippines, Singapore and Thailand (ASEAN-5), and
the market of China, in the context of the stock market crash in China in 2015. The purpose is to answer
two questions, namely whether: (i) has the stock market crash in China increased financial integration
in the ASEAN-5 financial markets and China? (ii) If the presence of long memories may put in question
the diversification of portfolios? The results suggest that these markets are segmented, except for Malaysia/
Singapore, bi-directional, and China/Filipinas, pre-crash. However, when analysing the stock
market crash period, the results indicate 16 integrated market pairs with structure breakdown (in 30
possible). When compared with the previous sub-period it was found that during the stock market crash
the level of financial integration increased significantly (533%). In the post-crash period, there were
eight integrated market pairs with broken structure. When compared to the crash period, the level of
integration decreased in 50%. In addition, we observed that during the stock market crash these Asian
markets did not have long memories, except for the Malaysian market, which reveals some predictability,
that is, the increase in integration does not lead to persistence in these Asian markets. In conclusion,
the ASEAN-5 markets and China mostly exhibit strong signs of efficiency in their weak form. The authors
consider that the implementation of portfolio diversification strategies is beneficial for investors.
These conclusions also open space for market regulators to take action to ensure better information
between these regional markets and international markets.
Keywords:
ASEAN5, Financial integration, Long memories, Portfolio diversification.
REFERENCES
Ahmed, A. D., & Huo, R. (2018). AC. Economic Modelling. https://doi.org/10.1016/j.econmod.
2018.09.029
Ali, S., Shahzad, S. J. H., Raza, N., & Al-Yahyaee, K. H. (2018). Stock market efficiency: A
comparative analysis of Islamic and conventional stock markets. Physica A: Statistical
Mechanics and Its Applications. https://doi.org/10.1016/j.physa.2018.02.169
Auer, R. A., & Mehrotra, A. (2014). Trade linkages and the globalisation of inflation in Asia and
the Pacific. Journal of International Money and Finance. https://doi.org/10.1016/j.jimonfin.
2014.05.008
Binner, J., Chen, S. H., Lai, K. H., Mullineux, A., & Swofford, J. L. (2011). Do the ASEAN
countries and Taiwan form a common currency area? Journal of International Money and
Finance. https://doi.org/10.1016/j.jimonfin.2011.06.012
Boubakri, S., & Guillaumin, C. (2015). Regional integration of the East Asian stock markets:
An empirical assessment. Journal of International Money and Finance. https://doi.
org/10.1016/j.jimonfin.2015.07.011
Chambet, A., & Gibson, R. (2008). Financial integration, economic instability and trade
structure in emerging markets. Journal of International Money and Finance. https://doi.
org/10.1016/j.jimonfin.2008.02.007
Dias, R., da Silva, J. V., & Dionรญsio, A. (2019). Financial markets of the LAC region: Does
the crisis influence the financial integration? International Review of Financial Analysis,
63(February), 160โ173. https://doi.org/10.1016/j.irfa.2019.02.008
Engle, R. F., & Granger, C. W. J. (1987). Co-Integration and Error Correction: Representation,
Estimation, and Testing. Econometrica, 55(2), 251. https://doi.org/10.2307/1913236
Ferreira, P., & Dionรญsio, A. (2016). How long is the memory of the US stock market? Physica
A: Statistical Mechanics and Its Applications. https://doi.org/10.1016/j.physa.2016.01.080
Gerlach, R., Wilson, P., & Zurbruegg, R. (2006). Structural breaks and diversification: The
impact of the 1997 Asian financial crisis on the integration of Asia-Pacific real estate
markets. Journal of International Money and Finance. https://doi.org/10.1016/j.jimonfin.
2006.07.002
Glick, R., & Hutchison, M. (2013). Chinaโs financial linkages with Asia and the global financial
crisis. Journal of International Money and Finance. https://doi.org/10.1016/j.jimonfin.
2013.06.025
Gregory, A. W., & Hansen, B. E. (1996). Residual-based tests for cointegration in models
with regime shifts. Journal of Econometrics, 70(1), 99โ126. https://doi.org/10.1016/0304-
4076(69)41685-7
Gulzar, S., Mujtaba Kayani, G., Xiaofeng, H., Ayub, U., & Rafique, A. (2019). Financial cointegration
and spillover effect of global financial crisis: a study of emerging Asian financial
markets. Economic Research – Ekonomska Istrazivanja. https://doi.org/10.1080/13316
77X.2018.1550001
Johansen, S. (1988). Statistical Analysis of Cointegrated Vectors. Journal of Economic Dynamics
and Control, 12(2โ3), 231โ254.
Lee, E.-J. (2017). Intra- and inter-regional portfolio diversification strategies under regional
market integration: Evidence from U.S. global banks. International Review of Financial
Analysis. https://doi.org/10.1016/j.irfa.2017.08.001
Mensi, W., Tiwari, A. K., & Yoon, S. M. (2017). Global financial crisis and weak-form efficiency
of Islamic sectoral stock markets: An MF-DFA analysis. Physica A: Statistical Mechanics
and Its Applications. https://doi.org/10.1016/j.physa.2016.12.034
Ngene, G., Tah, K. A., & Darrat, A. F. (2017). The random-walk hypothesis revisited: new evidence
on multiple structural breaks in emerging markets. Macroeconomics and Finance
in Emerging Market Economies. https://doi.org/10.1080/17520843.2016.1210189
Peng, C. K., Buldyrev, S. V., Havlin, S., Simons, M., Stanley, H. E., & Goldberger, A. L. (1994).
Mosaic organization of DNA nucleotides. Physical Review E, 49(2), 1685โ1689. https://doi.
org/10.1103/PhysRevE.49.1685
Phylaktis, K., & Ravazzolo, F. (2002). Measuring financial and economic integration with equity
prices in emerging markets. Journal of International Money and Finance. https://doi.
org/10.1016/S0261-5606(02)00027-X
Pradhan, R. P., Arvin, B. M., Norman, N. R., Nair, M., & Hall, J. H. (2016). Insurance penetration
and economic growth nexus: Cross-country evidence from ASEAN. Research in
International Business and Finance. https://doi.org/10.1016/j.ribaf.2015.09.036
Shirvani, H., & Delcoure, N. V. (2016). The random walk in the stock prices of 18 OECD countries:
Some robust panel-based integration and cointegration tests. Journal of Economic
Studies. https://doi.org/10.1108/JES-03-2015-0053
Wu, F. (2019). Stock market integration in East and Southeast Asia: The role of global factors.
International Review of Financial Analysis. https://doi.org/10.1016/j.irfa.2019.101416
ย
ย
