Financial Market Integration: The Regional and Global Nexus of ASEAN-5
This study examines empirically the financial integration among the ASEAN-5 countries and the integration of the ASEAN-5 financial markets and the global financial markets during the period from March 1995 to June 2017. Using data from 17 stock indexes across the world, the cointegration test suggests incomplete and time-varying connections both among the ASEAN-5 countries and among the ASEAN-5 and global stock markets. Relationships strengthened during the financial crisis and were weak during normal market circumstances. However, the degree of regional and global cointegrations lessened after the Asian financial crisis. Our findings imply that the diversification benefits can be enjoyed by a well-diversified portfolio across the regions during economic expansion but the strong connection during the market turmoil can be very harmful since the similar risk factors are harbored by interconnected financial markets.