Abstract
A benefit of portfolio diversification has been designated as evidence showing a low level of stock market interdependence. Therefore, this study aims at examining the interdependence of ASEAN-5 stock markets and the US, Japan, and China in order to increase portfolio diversification benefit among those countries. We proposed the time-varying copula-based VAR model to measure the interdependence and the transmission of stock price movement. Also, a forecasting Kendall’s tau method was proposed to check robustness of the copula-based model. The main findings of this study revealed that the dynamic Kendall’s tau between the US and Indonesia, the US and Malaysia displayed tiny values. It indicates existence of opportunities to diversify an international portfolio. Moreover, the dynamic dependences also indicate that the interdependence between ASEAN-5 and China have been remaining limited. The results of IRFs showed that US had the strongest impact to ASEAN-5 while Indonesia and Malaysia had the lowest response to US, Japan, and China. In addition, the robustness check indicates that our prediction is precise.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Beirne, J., Gieck, J.: Interdependence and contagion in global asset markets. Rev. Int. Econ. 22(4), 639–659 (2014)
Chien, M.S., Lee, C.C., Hu, T.C., Hu, H.T.: Dynamic asian stock market convergence: evidence from dynamic cointegration analysis among china and asean-5. Econ. Model. 51, 84–98 (2015)
Embrechts, P., McNeil, A., Straumann, D.: Correlation and dependence in risk management: properties and pitfalls. In: Dempster, M.A.H. (ed.) Risk Management: Value at Risk and Beyond, pp. 176–223. Cambridge University Press, Cambridge (2002)
Kearney, C.: The determination and international transmission of stock market volatility. Glob. Finance J. 11(1–2), 31–52 (2000)
Kearney, C., Lucey, B.M.: International equity market integration: Theory, evidence and implications. Int. Rev. Financ. Anal. 13(5), 571–583 (2004)
Lim, L.K.: Convergence and interdependence between asean-5 stock markets. Math. Comput. Simul. 79(9), 2957–2966 (2009)
Madaleno, M., Pinho, C.: International stock market indices comovements: a new look. Int. J. Finan. Econ. 17(1), 89–102 (2011)
Ozcicek, O., McMillin, W.D.: Lag length selection in vector autoregressive models: symmetric and asymmetric lags. Appl. Econ. 31(4), 517–524 (1999)
Shabri Abd. Majid, M., Kameel Mydin Meera, A., Azmi Omar, M.: Interdependence of asean-5 stock markets from the us and japan. Glob. Econ. Rev. 37(2), 201–225 (2008)
Sirikanchanarak, D., Liu, J., Sriboonchitta, S., Xie, J.: Analysis of transmission and co-movement of rice export prices between Thailand and Vietnam. In: Huynh, V.-N., Kreinovich, V., Sriboonchitta, S. (eds.) Causal Inference in Econometrics. SCI, vol. 622, pp. 333–346. Springer, Heidelberg (2016). doi:10.1007/978-3-319-27284-9_21
Sok-Gee, C., Karim, M.A., Karim, M.: Volatility spillovers of the major stock markets in asean-5 with the us and japanese stock markets. Int. Res. J. Finan. Econ. 44, 161–172 (2010)
Stulz, R.: A model of international asset pricing. J. Finan. Econ. 9(4), 383–406 (1981)
Wu, C.C., Chung, H., Chang, Y.H.: The economic value of co-movement between oil price and exchange rate using copula-based garch models. Energy Econ. 34(1), 270–282 (2012)
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer International Publishing AG
About this paper
Cite this paper
Lattayaporn, K., Liu, J., Sirisrisakulchai, J., Sriboonchitta, S. (2016). Modeling and Forecasting Interdependence of the ASEAN-5 Stock Markets and the US, Japan and China. In: Huynh, VN., Inuiguchi, M., Le, B., Le, B., Denoeux, T. (eds) Integrated Uncertainty in Knowledge Modelling and Decision Making. IUKM 2016. Lecture Notes in Computer Science(), vol 9978. Springer, Cham. https://doi.org/10.1007/978-3-319-49046-5_43
Download citation
DOI: https://doi.org/10.1007/978-3-319-49046-5_43
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-49045-8
Online ISBN: 978-3-319-49046-5
eBook Packages: Computer ScienceComputer Science (R0)