This study examines long-run relationships and short-run dynamic causal linkages among the U.S., Japanese, and ten Asian emerging stock markets, with the particular attention to the 1997-1998 Asian financial crisis. Extending related empirical studies, comparative analyses of pre-crisis, crisis, and post-crisis periods are conducted to comprehensively evaluate how stock market integration is affected by financial crises. In general, the results for the case of Asia show that both long-run cointegration relationships and short-run causal linkages among these markets were strengthened during the crisis and that these markets have generally been more integrated after the crisis than before the crisis. Detailed country-by-country analyses are provided, which yield a variety of new results concerning the roles of individual countries in international stock market integration. An important implication of our findings is that the degree of integration among countries tends to change over time, especially around periods marked by financial crises.

Stock Market Integration and Financial Crises: The Case of Asia

This study examines long-run relationships and short-run dynamic causal linkages among the US, Japanese, and ten Asian emerging stock markets, with the particular attention to the 1997–1998 Asian financial crisis. Extending related empirical studies, comparative analyses of pre-crisis, crisis, and post-crisis periods are conducted to comprehensively evaluate how stock market integration is affected by financial crises. In general, the results for the case of Asia show that both long-run cointegration relationships and short-run causal linkages among these markets were strengthened during the crisis and that these markets have generally been more integrated after the crisis than before the crisis. Detailed country-by-country analyses are provided, which yield a variety of new results concerning the roles of individual countries in international stock market integration. An important implication of our findings is that the degree of integration among countries tends to change over time, especially around pe...

Stock market integration and financial crises: the case of Asia

https://repository.up.ac.za/bitstream/handle/2263/6209/Pretorius_Economic(2002).pdf;sequence=1

Economic determinants of emerging stock market interdependence

https://www.ceauk.org.uk/2008-conference-papers/Lihong-Wang-Nancy-Huyghebaert.pdf

The co-movement of stock markets in East Asia: Did the 1997–1998 Asian financial crisis really strengthen stock market integration?

We construct a Pearson correlation-based network and a partial correlation-based network, i.e., two minimum spanning trees (MST-Pearson and MST-Partial), to analyze the correlation structure and evolution of world stock markets. We propose a new method for constructing the MST-Partial. We use daily price indices of 57 stock markets from 2005 to 2014 and find (i) that the distributions of the Pearson correlation coefficient and the partial correlation coefficient differ completely, which implies that the correlation between pairs of stock markets is greatly affected by other markets, and (ii) that both MSTs are scale-free networks and that the MST-Pearson network is more compact than the MST-Partial. Depending on the geographical locations of the stock markets, two large clusters (i.e., European and Asia-Pacific) are formed in the MST-Pearson, but in the MST-Partial the European cluster splits into two subgroups bridged by the American cluster with the USA at its center. We also find (iii) that the centrality structure indicates that outcomes obtained from the MST-Partial are more reasonable and useful than those from the MST-Pearson, e.g., in the MST-Partial, markets of the USA, Germany, and Japan clearly serve as hubs or connectors in world stock markets, (iv) that during the 2008 financial crisis the time-varying topological measures of the two MSTs formed a valley, implying that during a crisis stock markets are tightly correlated and information (e.g., about price fluctuations) is transmitted quickly, and (v) that the presence of multi-step survival ratios indicates that network stability decreases as step length increases. From these findings we conclude that the MST-Partial is an effective new tool for use by international investors and hedge-fund operators.

Hsiao-Ching Sheng

Papers

A study of cointegration and variance decomposition among national equity indices before and during the period of the Asian financial crisis