Time-Varying Linkages of Economic Activities in China and the Stock Markets in ASEAN-5

Contemporary Economics, Vol. 10, No. 2, pp. 137-152, 2016

16 Pages Posted: 25 Sep 2016

See all articles by Kee Teng

Kee Teng

Tunku Abdul Rahman University College (TARC)

Siew Hwa Yen

Universiti Sains Malaysia (USM)

Soo Y. Chua

Universiti Sains Malaysia (USM)

Hooi Hooi Lean

Universiti Sains Malaysia

Date Written: June 30, 2016

Abstract

This study attempts to investigate the evolution of dynamic linkages and volatility spillover between the five countries of the Association of Southeast Asian Nations (ASEAN-5) stock markets and China’s economic activities. By using the movements and structural breaks of the time-varying correlation and Granger causality test, a suitable destination for equity portfolio diversification can be determined among the studied markets. This study covers monthly data from January 1991 to March 2015. The DCC-MGARCH model shows that the studied countries are time-varying correlated, while the structural break observed by Bai and Perron test coincided with major economic shocks, policy changes and the establishment of regional trade policies. The VAR model Granger causality test observed no volatility spillover from Chinese economic activities to the ASEAN-5 stock markets, except for Malaysia and the Philippines. However, the ASEAN-5 stock markets’ volatility exerts a significant influence on China’s economy, except for Singapore’s stock market volatility. This study reveals that ASEAN-5 has gradually became the preferred destination for diversifying equity portfolios for investors in China.

Keywords: ASEAN, China, financial integration, volatility spillover

JEL Classification: F15, F36

Suggested Citation

Teng, Kee and Yen, Siew Hwa and Chua, Soo Y. and Lean, Hooi Hooi, Time-Varying Linkages of Economic Activities in China and the Stock Markets in ASEAN-5 (June 30, 2016). Contemporary Economics, Vol. 10, No. 2, pp. 137-152, 2016 , Available at SSRN: https://ssrn.com/abstract=2842604

Kee Teng

Tunku Abdul Rahman University College (TARC) ( email )

Jalan Kolej
Taman Bandar Baru
Perak, Kampar 31900
Malaysia

Siew Hwa Yen

Universiti Sains Malaysia (USM) ( email )

Jalan Sungai Dua
Minden, Penang 11800
Malaysia

Soo Y. Chua

Universiti Sains Malaysia (USM) ( email )

Jalan Sungai Dua
Minden, Penang 11800
Malaysia

Hooi Hooi Lean (Contact Author)

Universiti Sains Malaysia ( email )

Economics Program
School of Social Sciences
USM, Penang 11800
Malaysia
604-6532663 (Phone)
604-6570918 (Fax)

HOME PAGE: http://www.soc.usm.my/LeanPages/index.html

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