Market integration and contagion: Evidence from Asian emerging stock and foreign exchange markets Export

@article{citeulike:1956041, abstract = {This paper examines whether Asian emerging stock markets (India, Korea, Malaysia, Philippines, Taiwan, and Thailand) have become integrated into world capital markets since their official liberalization dates by estimating and testing a dynamic integrated international capital asset pricing model (ICAPM) in the absence of purchasing power parity (PPP) using an asymmetric multivariate GARCH(1,1)-in-Mean approach. Also examined in this paper is whether there are pure contagion effects between stock and foreign exchange markets for each Asian country during the 1997 Asian crisis. The empirical results show that first, both currency and world market risks are priced and time-varying, suggesting that an international asset pricing model under PPP and constant price of risk might give rise to model misspecification. Second, the stock markets for India, Korea, Malaysia, Philippines, and Thailand were segmented from the world capital markets before their liberalization dates, but all six markets have become fully integrated since then. Third, the market liberalization has reduced the cost of capital and price volatility for most of the countries. Finally, as for the contagion effects, strong positive impact of return shocks originating from the domestic stock market to its foreign exchange market during the crisis is found. This dynamic relationship between stock market and foreign exchange market is consistent with stock-oriented exchange rate models.}, author = {Tai, Chu-Sheng}, citeulike-article-id = {1956041}, citeulike-linkout-0 = {http://dx.doi.org/10.1016/j.ememar.2006.09.011}, citeulike-linkout-1 = {http://www.sciencedirect.com/science/article/B6W69-4MWGFGT-1/2/46d6cac21ad98cebfd1f2567e676a666}, doi = {10.1016/j.ememar.2006.09.011}, journal = {Emerging Markets Review}, keywords = {asia, capital\_flow, international\_finance}, month = {December}, number = {4}, pages = {264--283}, posted-at = {2007-11-22 04:05:17}, priority = {2}, title = {Market integration and contagion: Evidence from Asian emerging stock and foreign exchange markets}, url = {http://dx.doi.org/10.1016/j.ememar.2006.09.011}, volume = {8}, year = {2007} }

TY - JOUR ID - citeulike:1956041 L3 - citeulike-article-id:1956041 N2 - This paper examines whether Asian emerging stock markets (India, Korea, Malaysia, Philippines, Taiwan, and Thailand) have become integrated into world capital markets since their official liberalization dates by estimating and testing a dynamic integrated international capital asset pricing model (ICAPM) in the absence of purchasing power parity (PPP) using an asymmetric multivariate GARCH(1,1)-in-Mean approach. Also examined in this paper is whether there are pure contagion effects between stock and foreign exchange markets for each Asian country during the 1997 Asian crisis. The empirical results show that first, both currency and world market risks are priced and time-varying, suggesting that an international asset pricing model under PPP and constant price of risk might give rise to model misspecification. Second, the stock markets for India, Korea, Malaysia, Philippines, and Thailand were segmented from the world capital markets before their liberalization dates, but all six markets have become fully integrated since then. Third, the market liberalization has reduced the cost of capital and price volatility for most of the countries. Finally, as for the contagion effects, strong positive impact of return shocks originating from the domestic stock market to its foreign exchange market during the crisis is found. This dynamic relationship between stock market and foreign exchange market is consistent with stock-oriented exchange rate models. IS - 4 JF - Emerging Markets Review EP - 283 TI - Market integration and contagion: Evidence from Asian emerging stock and foreign exchange markets VL - 8 SP - 264 KW - asia KW - capital_flow KW - international_finance AU - Tai, Chu-Sheng PY - 2007/12// UR - http://dx.doi.org/10.1016/j.ememar.2006.09.011 ER -