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Does trade matter for stock market integration?

Author

Listed:
  • Bakri Abdul Karim
  • M. Shabri Abd. Majid
Abstract
Purpose - The purpose of this paper is to re‐examine the stock market integration and short‐run dynamic interactions between the Malaysian stock market and the stock markets of its major trading partners (the USA, Japan, Singapore, China and Thailand). Design/methodology/approach - Weekly stock indices spanning from January 1992 to May 2008 is analysed using autoregressive distributed lag (ARDL) bound testing approach and vector autoregression (VAR) framework. Findings - Stock markets of Malaysia and its major trading partners are found to be integrated. To some extent, it is found that trade does matter for stock market integration. Additional, geographical proximity and close relationship between the countries further contributes towards a greater integration between them. To move forward to a greater financial integration among these countries, trade liberalisation, including reduction or removal of trade and investment barriers would be necessary. Originality/value - This paper is among the first attempts to use ARDL and VAR frameworks to examine integration among the stock markets of Malaysia and its major trading partners. The findings of the study would shed some empirical lights for the purpose of policy making.

Suggested Citation

  • Bakri Abdul Karim & M. Shabri Abd. Majid, 2010. "Does trade matter for stock market integration?," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 27(1), pages 47-66, March.
    • Handle: RePEc:eme:sefpps:v:27:y:2010:i:1:p:47-66
    DOI: 10.1108/10867371011022975
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    References listed on IDEAS

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    1. Robert N McCauley & San-Sau Fung & Blaise Gadanecz, 2002. "Integrating the finances of East Asia," BIS Quarterly Review, Bank for International Settlements, December.
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    Cited by:

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    2. Lim, Siok Jin, 2020. "Portfolio diversification opportunities for U.S. Islamic investors with its trading partners when the world catches a cold: A Multivariate-GARCH and wavelet approach," MPRA Paper 103295, University Library of Munich, Germany.
    3. Rahim, Adam Mohamed & Masih, Mansur, 2018. "Comovement of stock markets of Singapore and its major Asian trading partners," MPRA Paper 110319, University Library of Munich, Germany.
    4. Dhruv Rawat & Sujay Patni & Ram Mehta, 2021. "Stock prices and Macroeconomic indicators: Investigating a correlation in Indian context," Papers 2112.08071, arXiv.org, revised Feb 2022.
    5. Nicholas Addai Boamah, 2021. "Integration, investor protection rules and global informational inefficiency of emerging financial markets," SN Business & Economics, Springer, vol. 1(6), pages 1-22, June.
    6. Syahril Syahril & Raja Masbar & Sofyan Syahnur & Shabri A. Majid & T. Zulham & Jumadil Saputra & Saiful Badli & Irmayani Irmayani, 2019. "The Effect of Global Prices of Crude Palm Oil, Marketing Margins and Palm Oil Plantations on the Environmental Destruction: An Application of Johansen Cointegration Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 305-312.
    7. Song, Yuegang & Huang, Ruixian & Paramati, Sudharshan Reddy & Zakari, Abdulrasheed, 2021. "Does economic integration lead to financial market integration in the Asian region?," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 366-377.
    8. Jonathan A. Batten & Peter G. Szilagyi & Wagner, 2015. "Should emerging market investors buy commodities?," Applied Economics, Taylor & Francis Journals, vol. 47(39), pages 4228-4246, August.
    9. Ahmed Shafique Joyo & Lin Lefen, 2019. "Stock Market Integration of Pakistan with Its Trading Partners: A Multivariate DCC-GARCH Model Approach," Sustainability, MDPI, vol. 11(2), pages 1-23, January.
    10. Mohammed S. Khaled & Stephen P. Keef, 2014. "On the dynamics of international stock market efficiency," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-11, December.
    11. Sudharshan Reddy Paramati & Eduardo Roca & Rakesh Gupta, 2016. "Economic integration and stock market dynamic linkages: evidence in the context of Australia and Asia," Applied Economics, Taylor & Francis Journals, vol. 48(44), pages 4210-4226, September.

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