Post-global financial crisis and dynamic linkages among the East Asian equity markets

Abstract

This paper investigates the dynamic linkages among the seven equity markets in the East Asian region following the Global Financial Crisis. The markets include Hong Kong, Singapore, Japan, Malaysia, Taiwan, Thailand and Vietnam. Three main methods employed in the paper are the multivariate co-integration test (Johansen test) and multivariate Granger causality test based on the vector autoregression (VAR) model and the diagonal BEKK-MGARCH model. Our findings reveal the existence of one co-integrating vector among the markets, suggesting a long-run linkage of the markets during the post-GFC period. The leading roles of the United States and Singapore equity markets are suggested, as they significantly influence most markets in the sample, while the Hong Kong and Vietnamese equity markets are found to be the least influential markets in the region. In addition, empirical evidence of high volatility linkages is discovered between the United States and each of the East Asian markets during the post-GFC period.