Pacific Basin stock markets and international capital asset pricing

Jan, Yin-Ching; Chou, Peter Shyan-Rong; Hung, Mao‐Wei

doi:10.1016/s1044-0283(00)00013-2

Cited by 10 publications

(5 citation statements)

References 39 publications

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“…From a global perspective, Southeast Asian markets have had little exposure and low correlation with the western markets until the early 2000s (Aityan et al , 2010). Nonetheless, because of the economic development in the region, Southeast Asian equity markets have become an essential constituent of fund managers’ international portfolios for diversification (Jan et al , 2000; Johnson and Soenen, 2002; Narayan et al , 2014). According to The Stock Exchange of Thailand (2021), Singapore is the largest stock exchange by market capitalization in Southeast Asia, followed by Thailand.…”

Section: Introductionmentioning

confidence: 99%

Nexus between Southeast Asian stock markets, bitcoin and gold: spillover effect before and during the COVID-19 pandemic

Kakinuma

2021

JABS

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Purpose This study aims to provide empirical evidence on the return and volatility spillover effects between Southeast Asian stock markets, bitcoin and gold in the periods before and during the COVID-19 pandemic. The interdependence among different asset classes, the two leading stock markets in Southeast Asia (Singapore and Thailand), bitcoin and gold, is analyzed for diversification opportunities. Design/methodology/approach The vector autoregressive-Baba, Engle, Kraft, and Kroner-generalized autoregressive conditional heteroskedasticity model is used to capture the return and volatility spillover effects between different financial assets. The data cover the period from October 2013 to May 2021. The full period is divided into two sub-sample periods, the pre-pandemic period and the during-pandemic period, to examine whether the financial turbulence caused by COVID-19 affects the interconnectedness between the assets. Findings The stocks in Southeast Asia, bitcoin and gold become more interdependent during the pandemic. During turbulent times, the contagion effect is inevitable regardless of region and asset class. Furthermore, bitcoin does not provide protection for investors in Southeast Asia. The pricing mechanism and technology behind bitcoin are different from common stocks, yet the results indicate the co-movement of bitcoin and the Singaporean and Thai stocks during the crisis. Finally, risk-averse investors should ensure that gold constitutes a significant proportion of their portfolio, approximately 40%–55%. This strategy provides the most effective hedge against risk. Originality/value The mean return and volatility spillover is analyzed between bitcoin, gold and two preeminent stock markets in Southeast Asia. Most prior studies test the spillover effect between the same asset classes such as equities in different regions or different commodities, currencies and cryptocurrencies. Moreover, the time-series data are divided into two groups based on the structural break caused by the COVID-19 pandemic. The findings of this study offer practical implications for risk management and portfolio diversification. Diversification opportunities are becoming scarce as different financial assets witness increasing integration.

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Section: Introductionmentioning

confidence: 99%

Nexus between Southeast Asian stock markets, bitcoin and gold: spillover effect before and during the COVID-19 pandemic

Kakinuma

2021

JABS

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“…Their samples included the equity and bond data of Germany, Japan, the US, and the UK. Jan et al (2000) examined the explanatory power of the conditional version of the international CAPM for the returns of Pacific Basin equity markets; and their results showed that most individual Pacific Basin markets were explained by the conditional international CAPMs.…”

Section: Literature Reviewmentioning

confidence: 99%

A Quantitative Investigation of the Time-varying Beta of the International CAPM: The Case of North American and European Equity Portfolios

Tsuji¹

2017

jmr

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This paper investigates the time-invariant and the time-varying betas of the international capital asset pricing model (CAPM) for North American and European equity portfolio returns over the period from August 1, 1990 to June 30, 2016. Our quantitative examinations using the full vector-half (VECH) model reveal the following interesting evidence. First, we find that (1) the time-invariant international CAPM beta value for North American equity portfolio returns and that for European equity portfolio returns, which are derived from the standard ordinary least squares (OLS) method, are both close to one. In contrast, our examinations find that (2) the time-varying international CAPM betas of North American equity portfolio returns are lower than one before 1996, and slightly higher than one after around 1996. Moreover, our investigations further reveal that (3) the time-varying international CAPM betas of European equity portfolio returns are lower than one before around 2004, and clearly higher than one after around 2004.

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“…Thus, it is likely that a more optimal measure of risk could result from including other risk components. For instance, Harvey (1991), Domowitz, Glen and Madhavan (1998), Dumas and Solnik (1995), DeSantis andGerard (1997) andJan Chou andHung (2000) suggest that currency risk is likely to be an important factor in global asset pricing models. Possibly dividends and earnings can be more important in some markets than in others (Jermakowicz andGornik-Tomaszewski, [1998], Travlos, Trigeorgis andVafeas, [2001]).…”

Section: B Time Series Analysismentioning

confidence: 99%

Does Total Risk Matter? The Case of Emerging Markets

Girard¹,

Sinha²

2006

MFJ

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This paper examines the relationships between market risk premiums, time-varying variance and covariance in forty-eight emerging, and seven developed capital markets. We allow each market's risk premium generating process to be state-dependent by accounting for negative and positive market price of variance and covariance risk. We find that half of the emerging markets exhibit reward to world variance while for the other half are only sensitive to local risk factors. We also find evidence of a negative relationship between reward to local risk and reward to world risk. Accordingly, the relative importance of one reward versus the other depends on the ever-changing correlation with the world market. Finally, we show that correlation is not a factor that explains reward to local risk in few segmented capital markets (JEL: G12; G15).

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Pacific Basin stock markets and international capital asset pricing

Cited by 10 publications

References 39 publications

Nexus between Southeast Asian stock markets, bitcoin and gold: spillover effect before and during the COVID-19 pandemic

Nexus between Southeast Asian stock markets, bitcoin and gold: spillover effect before and during the COVID-19 pandemic

A Quantitative Investigation of the Time-varying Beta of the International CAPM: The Case of North American and European Equity Portfolios

Does Total Risk Matter? The Case of Emerging Markets

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