Chapter 4 Conditional autocorrelation and stock market integration in the Asia-Pacific

Abstract

This chapter considers the relationship between stock market autocorrelation and (i) the presence of international investors which is proxied by the level of capital market integration and (ii) stock market volatility. Drawing from a sample of nine Asia-Pacific stock indices, significant evidence of a relationship between the presence of international investors and the level of stock market autocorrelation is found. This evidence is consistent with the view that international investors are positive feedback traders. Robustness testing of this model suggests that the trading strategy of international investors changed as a result of the Asian currency crisis. The evidence for the role of volatility in explaining autocorrelation is, however, is generally weak and varies across the sample countries.

Citation

Kim, S.-J. and McKenzie, M.D. (2007), "Chapter 4 Conditional autocorrelation and stock market integration in the Asia-Pacific", Kim, S.-J. and Mckenzie, M.D. (Ed.) Asia-Pacific Financial Markets: Integration, Innovation and Challenges (International Finance Review, Vol. 8), Emerald Group Publishing Limited, Leeds, pp. 63-94. https://doi.org/10.1016/S1569-3767(07)00004-0