ABSTRACT
This chapter investigates the extent and structure of equity market price linkages between Australia and various Association of Southeast Asian Nations (ASEAN) countries, both in the long-run and in the short-run using cointegration based on the Johansen procedure, Granger-causality, forecast variance decomposition and impulse response analyses. Studies on Australia’s equity market linkages with other countries are relatively few and have mostly been focused on developed markets. Thus, it is important, that the degree and nature of interdependence between Australian and ASEAN’s financial markets be investigated. Australia’s investment in ASEAN has been relatively insignificant since the mid 1980s. Australia’s investment overseas has been mainly in the US, UK and New Zealand. ASEAN’s investment in Australia has also been relatively insignificant. The main investors in Australia have been the US, the UK, and Japan. In terms of capitalisation, the Australian equity market, although somewhat larger, is comparable to that of Malaysia.
