VOLATILITY CO-MOVEMENT OF ASEAN-5 EQUITY MARKETS
AbstractEconomic cross-linkages and the increased co-movement of asset prices across international markets are important
outcomes as the result of globalization. Hereby, the nature of international stock markets and the extent to which the 1997-
1998 East Asian turmoil had affected the market relationship of five countries of Association of Southeast Asian Nations
(ASEAN-5) remain as probing questions. Using an array of econometrics analysis upon the stock price volatility series, we
found partial market integration for the pre-crisis; whereas in the post-crisis, complete integration prevails. Hence, the
financial meltdown in 1997 is said to be a contagion led crisis as markets integrate well off after the crisis than prior to it.
Nonetheless, long run portfolio asset diversification benefits across the ASEAN-5 basin are reduced as markets are
integrated in both the pre- and post-crisis. As such, the formation of the ASEAN Investment Area (AIA- 1998) parallel with
the establishment of a developed ASEAN Index-Financial Times Stock Exchange (FTSE) regional index is viable to foster
deeper regional market convergence.
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