Rui Dias – Escola Superior de Ciências Empresarias – Institute Polytechnic of Setúbal, Portugal & CEFAGE, University
of Évora, Portugal

Paula Heliodoro – Escola Superior de Ciências Empresarias – Institute Polytechnic of Setúbal, Portugal

Paulo Alexandre – Escola Superior de Ciências Empresarias – Institute Polytechnic of Setúbal, Portugal

Cristina Vasco – IEFP – Instituto do Emprego e Formação Profissional, Alcácer 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, 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.

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