ABSTRACT
This chapter investigates the specific issue of equity markets price linkage between Australia and its major trading partners – the US, UK, Japan, Hong Kong, Singapore, Taiwan and Korea. Traditionally, Australia's major economic partners, in terms of trade and investment, have been the United States and the United Kingdom. The issue of equity market price interdependence between Australia and its major trading partners is investigated during three subperiods: before financial deregulation (1974-83), before the stock market crash (1984-87) and after the crash (1988-95). The chapter provides a discussion of the institutional setting in terms of trade and investment interaction, financial deregulation and comparative features of the different stock markets. The US, Japanese and Australian markets are dominated by institutional investors while the Hong Kong, Singaporean, Korean and Taiwanese markets mainly consist of individual investors. Price-earning (P/E) ratios vary across markets with Japan having the highest and Hong Kong the lowest.
