Stock market capitalization and financial integration in the Asia Pacific region


Tan, Hui-Boon, Cheah, Eng-Tuck, Johnson, Johnnie E.V., Sung, M. and Chuah, Chong-Hin (2012) Stock market capitalization and financial integration in the Asia Pacific region. Applied Economics, 44, (15), 1951-1961. (doi:10.1080/00036846.2011.556593).

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Description/Abstract

The stock market capitalization (SMC) of a country, defined as the aggregated market value equity of companies in the respective equity market, is commonly used to measure the widening and deepening of stock market activity. SMC also influences economic growth predictions and public consensus concerning the value of the stock market. However, no previous work has examined the role this variable plays in the process of financial integration. This paper provides an argument for the use of SMC as a means of deciding which countries are acting as leaders in creating a fully integrated equity market in the Asia Pacific region. A total of twelve countries in the Asia Pacific region were divided into ‘Emerging Market’ and ‘Advanced Market’ equity blocks. We examine the relative size of the speed of adjustments derived from the error correction models following the Engle-Granger two-step procedure framework and apply the Granger causality test. The results suggest that Hong Kong SAR possesses the necessary credentials to act as market leader. In fact, Hong Kong SAR appears to be the only contender for market leader of both the ‘Emerging Market’ and ‘Advanced Market’ equity blocks.

Item Type: Article
ISSNs: 0003-6846 (print)
1466-4283 (electronic)
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HG Finance
Divisions: University Structure - Pre August 2011 > School of Management
ePrint ID: 171483
Date Deposited: 17 Jan 2011 12:33
Last Modified: 27 Mar 2014 19:20
URI: http://eprints.soton.ac.uk/id/eprint/171483

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