Connecting the Dots: Crises’ Influence on Persistence and Financial Integration in Southeast Asian Capital Markets
Connecting the Dots: Crises’ Influence on Persistence and Financial Integration in Southeast Asian Capital Markets

Author(s): Mariana Chambino, Rui Dias, Paulo Alexandre
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Events for 2020 and 2022; Southeast Asia; Autocorrelation; Integration; Portfolio diversification
Summary/Abstract: This study aimed to assess risk diversification in the capital markets of nine Asian countries, including Hong Kong, Indonesia, Malaysia, South Korea, Japan, the Philippines, Thailand, China, and Taiwan. The research posed two main questions: (i) Did events in 2020 and 2022 create inefficiencies in these markets? (ii) If so, did autocorrelation of returns lead to increased linkages among these markets? The findings revealed the presence of autocorrelation, conditional heteroscedasticity, and nonlinear elements in the sample, suggesting persistence in returns during both tranquil and stressful periods. Consequently, the first research question was refuted, indicating that market (in)efficiencies were not significantly influenced by these events. Additionally, the analysis using the rhoDCCA method did not suggest integration between the markets, leading to the rejection of the second research question. These results have implications for investors, regulators, and supervisors in these markets, suggesting a need to consider measures that align with the random walk and martingale hypotheses in stock price creation.

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