ABSTRACT
This chapter investigates the extent and structure of price linkages among five Association of Southeast Asian Nations (ASEAN) markets, both in the long-run and in the short-run using co-integration based on the Johansen procedure, Granger-causality, forecast variance decomposition and impulse response analyses. Bidirectional linkages occur between any pair of markets for Malaysia, Singapore and Thailand. The results of this study can therefore be of practical significance to investors who are considering the ASEAN region for investment diversification. It applies the techniques of cointegration, Granger-causality, forecast variance decomposition and impulse response analyses to test the degree and structure of relationship among the ASEAN equity market prices using MSCI weekly data covering the period 1988–95. The chapter provides an institutional background of the ASEAN markets. Finally, the results of the impulse response analyses indicate that the interaction among the ASEAN markets occurs immediately and continues even beyond two months.
