Market integration and financial linkages among stock markets in Pacific Basin countries

Julien Chevallier, Duc Khuong Nguyen, Jonathan Siverskog and Gazi Uddin

Journal of Empirical Finance, 2018, vol. 46, issue C, 77-92

Abstract: Financial development and globalization have significantly integrated stock markets around the world. This higher degree of interdependence and integration not only provides firms with higher access to international capital markets with lower cost of equity but also generates upward vulnerabilities for local markets due to their exposure to global and regional shocks. This article focuses on the level of interdependence across the Pacific Basin stock markets using the return spillover measure proposed by Diebold and Yilmaz (2009, 2012), given their increasing role in global trade and finance. We are also interested in investigating the effect of shocks affecting the United States and the Japanese stock markets as well as their transmission to the emerging markets. We mainly find that: (i) the interdependence of the emerging stock markets in the ASEAN countries is driven by a higher exposure to the US shocks than to shocks affecting the developed economies of East Asia, and (ii) the cross-market linkages in the Pacific Basin region have become stronger over time, which may reduce the benefit of regional diversification strategies and expose the countries of the region to increasing contagion risk. These results have important implications for public policies related to the issue of regional and global financial integration.

Keywords: Return spillover; Equity markets; Pacific Basin (search for similar items in EconPapers)
JEL-codes: C32 C58 G10 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S092753981730124X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Market Integration and Financial Linkages among Stock Markets in Pacific Basin Countries (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:46:y:2018:i:c:p:77-92

DOI: 10.1016/j.jempfin.2017.12.006

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().