The Asian financial crisis and the co-movement of Asian stock markets

摘要

The paper looks at how the co-movement of seven countries' stock markets has changed over the periods before, during and after the Asian financial crisis. To see this, we conducted correlation coefficients tests, co-integration tests, and Granger causality tests. The main findings are as follows.Before the crisis, there is almost no co-movement in the stock markets of seven Asian countries. However, uni-directional and bi-directional linkage among Asian equity markets has increased sharply since the financial crisis struck Asia in June 1997. In particular, a drastic increase in the co-movement among the four Southeast Asian countries of Hong Kong, Thailand, Indonesia, and Singapore is notable. During the 8 months of the post-crisis periods after January 1998 when the financial crisis reached the peak and the corresponding 8 months in 2000, the strong co-movement is still found and in some cases, the linkage among Asian stock markets gets even stronger.Major difference between this study and Malliaris and Urrutia (1992), which looked at the linkage among the major stock markets around the October crash of 1987 is that they report the crash increases the co-movement of world stock markets but after the crash, they find no significant linkage among even after the Asian financial crisis.