ارتباطات بازار سهام در بازارهای نوظهور: مفاهیم برای تنوع پرتفوی بین المللی

This paper examines stock market linkages of a group of Pacific-Basin countries with US and Japan by estimating the multivariate cointegration model in both the autoregressive (AR) and moving average (MA) forms over the period 1980–1998. Recursive estimation helps identify the evolution of the linkages. The results for the 1980s indicate that the relaxation of foreign ownership restrictions was not sufficient to attract foreign investors’ attention and that other factors must have affected the portfolio diversification decision. The results of the 1990s suggest that the relaxation of the restrictions might have strengthened international market interrelations. Country Funds have provided access to highly regulated capital markets.

There has been a considerable increase in interest on the interaction of international stock markets following the abolition of foreign exchange controls in both mature and emerging markets, the technological developments in communications and trading systems, and the introduction of innovative financial products, such as Country Funds and American Depository Receipts, which have created more opportunities for global international investments. Various approaches have been applied by the studies on international stock market linkages. For example, Longin and Solnik (1995) used cross-country correlations and found evidence of significant linkages between stock markets around the world. Bekaert and Harvey (1995) examined the conditional means and variances of stock returns by applying a one factor asset pricing model where expected returns in a country are affected by their covariance with a world benchmark portfolio when the market is perfectly integrated and by the variance of the country returns when it is completely segmented. Phylaktis and Ravazzolo (2002) measured financial linkages by analysing the covariance of excess returns on national stock markets of emerging economies. Another group of studies has concentrated on examining financial links amongst stock markets by using either bivariate or multivariate cointegration methodology. Kasa (1992) was the first to apply multivariate cointegration to five well-established financial markets in order to examine the existence of a single common stochastic trend as a driver of the cointegrated system. A single common stohastic trend in a group of markets means that they are perfectly correlated over long horizons and limiting the gains from international diversification. In the current study, we apply Kasa's (1992) approach and examine the potential inter-relationships amongst the trending behaviour of the stock price indices of a group of Pacific-Basin countries, Japan and the US. These Pacific-Basin markets have attracted a substantial proportion of international capital flows to emerging markets in recent years. Earlier work, which has examined long-run comovements between these markets and the more developed ones, has found weak financial linkages e.g. Chung and Lin (1994) on Japan, US, Taiwan, Hong Kong and Singapore over the period 1985–92; Corhay et al. (1995) on Australia, Hong Kong, Japan, Singapore and New Zealand over the period 1972–92; and Masih and Masih (1999) on US, Japan, UK, Germany, Singapore, Malaysia, Hong Kong and Thailand over the period 1992–97. The above studies, however, suffer from two weaknesses. First, they assume that all Pacific-Basin Countries are at the same stage of integration with the world market; and secondly, they did not take care to select the correct order of VAR system. Our analysis attempts to remedy these weaknesses and generally contributes to the literature in the following ways. First, it examines the financial links of these markets by estimating the multivariate cointegration model not only in the autoregressive (AR) form used in the previous studies but also in the moving average (MA) form, which allows one to examine the relative importance of each market to the common trend. In estimating the common stochastic trend we use the technique suggested by Gonzalo and Granger (1995), which makes possible the estimation of the transitory component of each market and highlights additional implications for international portfolio diversification to those of the autoregressive form. Secondly, we apply the recursive analysis to the cointegrating system developed by Hansen and Johansen (1998) in order to identify the evolution of linkages of these capital markets during the 1980s and 1990s and examine whether they are related to the existence of foreign exchange restrictions. That constitutes a novel approach to examining this issue. The same technique allows us to examine the effects of the Asian crisis of mid 1997 on the financial linkages of the region. Finally, in our study we follow Richards’ (1995) suggestion regarding the criteria for the selection of the correct order VAR system. Richards (1995) highlights the importance of using the correct criteria in selecting the lag structure in his criticisms of Kasa's (1992) work. The analysis in the paper has implications for international portfolio diversification. If stock markets share a common trend, that implies that there is a common force, such as arbitrage activity, that brings the stock markets together in the long-term and anyone market will be representative of the behaviour of that group of markets. Thus, testing for cointegration provides information of the degree of arbitrage activity in the long-term. If markets are interdependent and driven by common shocks, which have a permanent effect, they will provide limited possibilities of gaining abnormal profits by diversifying investment portfolios since they will be arbitraged away in the long-term. If, however, there are persistent deviations from the common trend, then international investors might make short-term speculative investments based on the forecast that the market will revert to its long-term relationship with the world market. The methodology used in this paper, that is, the moving average representation of the multivariate cointegration model, allows us to estimate the transitory component of each market and explore possible short-term diversification benefits. The paper is structured as follows. Section 2 deals with methodological issues. Section 3 reports the empirical results of the analysis of the cointegration space and the complementary common trend system. The final section summarises the main findings and offers some concluding remarks.

In this paper, we have investigated the linkages and dynamic interactions amongst a group of Pacific-Basin stock markets, Japan and the US. Our main objective was to examine whether these financial linkages were affected by the existence of foreign exchange restrictions. Furthermore, we wanted to investigate, whether alternative financial vehicles, such as Country Funds, provide a channel through which international investors access capital markets. We have examined these issues by estimating the multivariate cointegration model in the AR and MA forms. We also performed the recursive-based estimation to identify the evolution of these linkages. Our main findings are as follows. First, we find that all the stock markets under investigation are not linked together for either the 80 s or the 90 s. Similar results are found for the open markets of Honk Kong and Malaysia for the 80 s. This evidence suggests that the relaxation of foreign exchange restrictions is not sufficient to attract international investors’ attention and strengthen international market interrelations. There exist other factors, possibly related to information availability, accounting standards, or liquidity and political risk, which may affect the portfolio diversification decision. On the other hand, the increase in financial links for open and semi-open markets in the second sub-period suggests that the relaxation of foreign ownership restrictions might have enhanced links with world markets. Secondly, we find close financial links for Taiwan and Thailand with both Japan and US, during the first sub-period in which foreign ownership and other restrictions were in place. The results of the recursive analysis detect that the first forms of linkages correspond to the period of the introduction of First Country Funds. That can be explained by the fact that Country Funds in advanced markets are linked to their component assets traded in the Emerging Markets. The pricing efficiency, however, depends on the nature of the market segmentation of the Emerging Market and arbitrage restrictions. For example, in the case where the Country Fund is a perfect substitute for the underlying assets traded in the Emerging Market and foreign investors are prevented from accessing the Emerging Market from which the Country Fund originates, the component securities in the Emerging will be driven up to match the Country Fund by the unimpeded arbitrage of local investors from the Emerging Market. Thirdly, the recursive analysis for the most recent period indicates that the Asian crisis did not have a substantial effect on the degree of linkages of these markets. Finally, the estimated common trends mechanisms show that neither Japan, nor the US has a unique influence in the Pacific Rim. US plays a role, but small in magnitude, while Japan plays a more significant role, but is equally important as that of Thailand. Plotting the permanent component of each market, which corresponds to the common trend, and the actual stock price behaviour, we find that the difference of the two—the transitory component - to be substantial for Taiwan and US in the post 1996 period, thus, offering short-run diversification opportunities to international investors. The analysis in the paper of stock market linkages in these emerging markets has indicated that international investors have opportunities for portfolio diversification by investing in most of the Pacific Basin countries. On the one hand, the results for the open economies show that although the linkages have increased in recent years, they do not seem to respond to a common world growth factor, but to be affected by national factors, leaving room for long-term gains by investing in these markets. On the other hand, the results for the semi-open economies show that although long-term diversification benefits from exposure to these markets might be limited, short-run benefits might exist due to substantial transitory fluctuations.