Asian stock markets, a decade after global recession, coupled or decoupled?

Abstract

AbstractThis paper examines the dynamics of price integration among Asian financial markets during the postfinancial crisis period. We employ the autoregressive distributed lag (ARDL) bounds test to analyze the long‐run relationships, and the nonlinear ARDL (NARDL) test to explore asymmetries in the stock price behavior. The cointegration results could not produce any conclusive evidence of long‐run relations between stock markets. The estimated NARDL model affirms the presence of asymmetries in the stock price behavior. Namely, in the long run, we find a significant relation among stock price decreases of some markets while the long‐run relations among price increases are almost absent. Furthermore, in the short run, only negative changes in the stock price exert significant influences on the price performance of peers. This study improves the previous research in the area by testing the asymmetric effects of stock price integration on portfolio optimizations for global investors.