Linkages Between ASEAN Stock Markets: A Cointegration Approach

With increased market integration, the current world financial markets have become more closely correlated and interdependent over time. Understanding the information linkages and correlations between markets are important for policy makers and fund managers in their financial decisions in relation to investment and risk management. The existence of low correlation among returns from different national stock markets has been used frequently to justify the international diversification of portfolios. Another reason for investors to consider global investments is return enhancement. Securities issued by countries with higher growth rates are expected to earn higher rates of returns.