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SEVEN ASIAN EMERGING EQUITY MARKETS:
ARE THEY INTEGRATED?


Mukesh Chaudhry
Indiana University of Pennsylvania

Robert J. Boldin
Indiana University of Pennsylvania

Ibrahim Affaneh
Indiana University of Pennsylvania

Walayet Khan
University of Evansville

 


ABSTRACT


This study investigates how closely the equity indices of seven emerging countries in South Asia and South East Asia (Bangladesh, China, India, Indonesia, Malaysia, Pakistan and Sri Lanka) are integrated as these countries do share many common economic, political, and cultural relationships. The analysis uses the cointegration methodology developed by Johansen. It is the preferred method to other alternatives since it enables testing for the presence of more than one cointegrating vector. The cointegration results confirm that the equity indices of these countries are highly integrated. There is also evidence that some of the emerging economies have started displaying divergence from each other because of  dissimilar levels of development and growth. Equity markets integration should be of interest to academics, practitioners, institutional investors, portfolio managers and government regulators. If the equity markets are integrated, hedging and international diversification strategies will be less beneficial.


Key words: Emerging Asian equity markets, integration
JEL Codes: G14, G15