|Author Name||KOMATSUBARA Tadaaki (Ibbotson Associates Japan, Inc.) / OKIMOTO Tatsuyoshi (Visiting Fellow, RIETI) / TATSUMI Ken-ichi (Gakushuin University)|
|Creation Date/NO.||August 2016 16-E-084|
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This paper investigates the dynamics of integration in East Asian equity markets between 1995 and 2013 using a smooth-transition correlation GARCH model. Our results show that East Asian equity market integration among China and other countries has increased significantly since 2007, whereas that among other East Asian equity markets excluding China increased significantly in an earlier period from 1999 to 2001. Additionally, we find that increasing integration has been mostly caused by correlation increases in after-trading hours. These results suggest that stock prices in East Asia are sensitive to Europe and U.S. stocks because Europe and U.S. investors were actively investing in East Asian stocks. Indeed, the periods reflect striking increases in integration that correspond approximately to the start of intensive Europe and U.S. investment activity in East Asian stock markets.
Published: Komatsubara, Tadaaki, Tatsuyoshi Okimoto, and Kenichi Tatsumi, 2017. "Dynamics of integration in East Asian equity markets," Journal of The Japanese and International Economies, Vol. 45, pp. 37-50