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Evidence of financial integration in Asia: An empirical application of panel unit root tests and multivariate cointegration and causality procedures
Faculty of Commerce - Papers (Archive)
  • A. C. Worthington, University of Wollongong
  • H. Higgs, Griffith University
Publication Date
6-8-2007
Publication Details

This paper was originally published as Worthington, AC & Higgs, H, Evidence of financial integration in Asia: An empirical application of panel unit root tests and multivariate cointegration and causality procedures, University of Wollongong, School of Accounting and Finance Working Paper Series No. 07/09, 2007.

Abstract
This paper measures the extent of financial integration and interdependence among Asian equity markets over the period January 1993 to June 2006 using daily data. The analysis includes three developed markets (Hong Kong, Japan and Singapore) and eight emerging markets (China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand). The study uses panel unit root tests to test for non-stationarity, and conducts multivariate cointegration, Granger causality and level VAR procedures and variance decomposition are conducted to examine the equilibrium and causal relationships between these markets. The results indicate that there is a stationary long-run equilibrium relationship among, and significant and substantial short and long-run causal linkages between, these Asian equity markets. This evidence suggests that a high level of financial integration currently exists in the Asian region, notwithstanding the absence of extensive formal regional agreements aimed at promoting financial integration as found elsewhere, especially in the European Union.
Citation Information
A. C. Worthington and H. Higgs. "Evidence of financial integration in Asia: An empirical application of panel unit root tests and multivariate cointegration and causality procedures" (2007)
Available at: http://works.bepress.com/acworthington/25/