Efficiency, cointegration and contagion in equity markets : evidence from China, Japan and South Korea

Azad, Sohel 2009, Efficiency, cointegration and contagion in equity markets : evidence from China, Japan and South Korea, Asian economic journal, vol. 23, no. 1, pp. 93-118.

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Title Efficiency, cointegration and contagion in equity markets : evidence from China, Japan and South Korea
Author(s) Azad, Sohel
Journal name Asian economic journal
Volume number 23
Issue number 1
Start page 93
End page 118
Publisher Wiley-Blackwell Publishing Asia
Place of publication Richmond, Vic.
Publication date 2009-03
ISSN 1351-3958
1467-8381
Keyword(s) market efficiency
unit root
variance ratio
cointegration
contagion
simulation
Summary This paper empirically examines whether three East Asian stock markets, namely, those of China, Japan and South Korea, are individually and/or jointly efficient, and whether contagion exists between the cointegrated markets. While individual market efficiency is examined through testing for the random walk hypothesis, joint market efficiency is examined through testing for cointegration and contagion. The present study finds that the hypothesis of individual market efficiency is strongly rejected for the Chinese stock market, but not for the Japanese and the South Korean stock markets. However, when testing for cointegration, market efficiency is strongly rejected for all these markets. We take a simple case of contagion and find that although there is a long-term relationship among the three markets, the contagion hypothesis cannot be rejected only between Japanese and South Korean stock markets, indicating short-run portfolio diversification benefits from these two markets.
Language eng
Field of Research 159999 Commerce, Management, Tourism and Services not elsewhere classified
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2009, Wiley - Blackwell Publishing
Persistent URL http://hdl.handle.net/10536/DRO/DU:30042560

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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