Co-Integration and Causality among Stock Market Indices: Evidence from Asia-Pacific Markets
The purpose of this paper is to analyse the nature and level of interdependence of various stock markets of the Asia-Pacific region. This paper attempted to analyse whether there had been stock market interdependencies and dynamic interactions among selected global indices. This paper also ascertained the degree of association between stock markets. This study included the closing values of daily prices of various indices from January 2005 to May 2018 collected from the respective websites of the stock exchanges. This study investigated the stock market behaviour and the extent of integration among 12 stock indices from the Asia-Pacific region. This study involved a two-stage methodology. In the first part, normality, stationarity, and causality of the time series were tested. In the second part of the methodology, the focus was given to analyse the different stock markets interdependencies, to ascertain the degree of association, and to measure the market efficiency. The findings show that a considerable amount of interdependency exists among stock markets. It was also found that there is an association between markets. These results are recommended to policymakers, regulators, and researchers on the one hand and firms’ managers as well as investors on the other. These results provided few insights to the investors to those who are seeking portfolio diversification.