Revista de Economía y Negocios

Asian stock markets: a time series analysis of their cointegration

Abstract

Jarrett JE, Kyper E and Prante G

This research examines the time series characteristics of the stock price indices of the Hong Kong, Tokyo, and Singapore stock markets over the long time period from before 1997, from 1997 to 2007, and after 2007. Specifically, we calculate the rate of return and return volatility of the three markets and estimate the comovement of the three markets. We find that the average rate of return varies dramatically for the three stock markets and over time. Furthermore, we find that stock prices are serially positively correlated overall. In the multivariate regressions, we find that there is little evidence to show that the rate of return in certain markets universally affects the rate of return in other stock markets. We suggest, based on the evidence, that the three markets are cointegrated, but not universally over time and with each other in pairwise dimensions. Finally, we study and draw conclusions about the mean and variation of the volatility of the rates of return in the three stock markets studied.