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Who Moves the Malaysian Stock Market— the U.S. or Japan?: Empirical Evidence from the Pre-, During, and Post-1997 Asian Financial Crisis

Gadjah Mada International Journal of Business

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Title Who Moves the Malaysian Stock Market— the U.S. or Japan?: Empirical Evidence from the Pre-, During, and Post-1997 Asian Financial Crisis
 
Creator Mohd. Yusof, Rosylin
Abd. Majid, M. Shabri
 
Subject cointegration; diversification benefit; impulse response functions; stock market integration; variance decompositions
 
Description This paper examines long run co-movements between Malaysian stock market and the two largest stock markets in the world: the U.S. and Japan. By employing time-series analysis, i.e., cointegration, variance decompositions, and impulse response functions, the paper seeks to investigate which market actually leads the Malaysian stock market before, during, and after the 1997 Asian financial crisis periods. The results indicate that there is a co-movement of these markets only in the post crisis period. The Japanese stock market is found to significantly move the Malaysian stock market compared to U.S. stock market for the post-crisis period. At the same time, there seems to be a growing proportion of bilateral trade between Malaysia and Japan during the mentioned period. This finding seems to be consistent with the view that the stronger the bilateral trade ties between two countries, the higher the degree of co-movements (Masih and Masih 1999; Bracker et al. 1999; Pretorius 2002; Ibrahim 2003; Kearney and Lucey 2004). Our finding implies that the opportunities of gaining abnormal profits through investment diversification during the post-crisis period in the Malaysian and Japanese stock markets are diminishing as the markets move towards a greater integration. This further implies that any development in the Japanese economy has to be taken into consideration by the Malaysian government in designing policies pertaining to Malaysian stock market.
 
Publisher Master of Management, Faculty of Economics and Business, Universitas Gadjah Mada
 
Date 2006-09-12
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
application/pdf
 
Identifier http://journal.ugm.ac.id/gamaijb/article/view/5616
 
Source Gadjah Mada International Journal of Business; Vol 8, No 3 (2006): September-December
2338-7238
1411-1128
 
Language eng
 
Relation http://journal.ugm.ac.id/gamaijb/article/view/5616/4588
http://journal.ugm.ac.id/gamaijb/article/view/5616/4589