Regional integration of the East Asian stock markets: An empirical assessment

Dynamics of integration in East Asian equity markets

“…This subsection discusses the estimation results of a constrained three-regime model assuming two regimes for China-related pairs and pairs excluding China. More specifically, taking into consideration the differences between China-related pairs and pairs excluding China in terms of the timing of the increase in international integration, we impose r ij (1) = r ij (2) for China-related pairs and r ij (2) = r ij (3) for pairs excluding China on the three-regime STC model (4)．Here, r ij (k) is the (i, j) element for the correlation matrix R (k) . The regimes of the correlation matrices still consist of three regimes.…”

“…When c 1 < s t < c 2 , R t becomes close to the second regime correlation R (2) because G 1 (s t ) tends to be near one, but G 2 (s t ) tends to be near zero. Finally, when c 2 < s t , R t is close to R (3) with G 1 (s t ) and G 2 (s t ) taking values near one. Thus, under this specification, the time-varying correlation matrix R t changes smoothly from R (1) via R (2) to R (3) with time as first G 1 (s t ) changes from zero to one followed by a similar change in G 2 (s t ).…”

“…Finally, when c 2 < s t , R t is close to R (3) with G 1 (s t ) and G 2 (s t ) taking values near one. Thus, under this specification, the time-varying correlation matrix R t changes smoothly from R (1) via R (2) to R (3) with time as first G 1 (s t ) changes from zero to one followed by a similar change in G 2 (s t ). The extent to which the correlation is close to each regime's correlation, and the way in which it becomes close, depends on the values of c and γ, which can be estimated from data making the multiple-regime STC model attractive for the examination of the dynamic of integration in East Asian equity markets．…”

“…As stated above, a number of preceding studies analyze the long-run trend in international integration in major equity markets; however, there are few studies on East Asian equity markets. A notable exception is a recent study by Boubakri and Guillaumin (2015), where the authors find an upward trend in the regional integration of East Asian stock markets after 2008 based on the international capital asset pricing model (ICAPM) with the dynamic conditional correlation (DCC) model. ３ In a similar vein, the first contribution of this current paper is to investigate the long-run trend of integration in the East Asian equity markets, namely, China, Hong Kong, Japan, and South Korea using the STC model based on the work of Berben and Jansen (2005) and Kumar and Okimoto (2011).…”

Time varying integration amongst the South Asian equity markets: An empirical study

“…Huyghebaert and Wang (2010) examined the stock market integration for East Asian economies (China, Hong Kong, Taiwan, Singapore, South Korea and Japan) for a data spanning from July 1992 to June 2003 and used co-integration and VAR analysis to confirm limited equity market integration. Boubakri and Guillaumin (2015) studied the dynamics of equity market integration in the Asian region countries (China, South Korea, Hong Kong; China, Indonesia, Japan, Malaysia, Philippines, Singapore and Thailand) for the period January 1994 to November 2008. Results from the ICAPM methodology indicated that though the sample stock markets were partially segmented within the region.…”