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We examine how the degree of regional financial integration in African stock markets has evolved over the last eleven years. Despite increasing regional economic cooperation, the process of stock market integration has been slow. To facilitate growth via developed financial markets but keep financial stability risk at a minimum, further regional integration should be promoted, and mild capital controls on non-African investors may be necessary. A Diebold-Yilmaz spillover analysis is applied to ten African stock markets for the period between August 2004 and January 2015. We examine spillovers among four regions and among individual countries. Regional integration, as measured by total spillovers in Africa, is increasing but remains very low. These spillovers were temporarily heightened during the global financial crisis. Cross-regional spillovers are high between Northern and Southern Africa. Asymmetric capital controls on African and non-African investors must be considered to foster further regional integration and to mitigate financial stability risk. This is one of the few studies to address the construction of the future architecture of regionally integrated stock markets in emerging countries.

This paper examines the effect of both de jure and de facto measures of financial integration on bank profitability in five regional economic communities of Africa.

Using panel data from 405 banks operating in 47 African countries across five regional economic communities over 2007–2014, the study constructs a composite measure of bank profitability. The study then employs the dynamic two-step system GMM estimation technique to test the effect of both de jure and de facto measures of financial integration on bank profitability in Africa and across five sub-regional markets.

Overall, the results support a positive relationship between financial integration and overall bank profitability in Africa, except for the Arab Maghreb Union and Southern Africa Development Community.

The findings of this study suggest that increased financial integration in Africa directly improves bank’s overall profitability and the variations among the sub-regional markets inform tailored policy initiatives.

To the best of the authors' knowledge, this is the first study on Africa to employ a composite measure of bank profitability to assess its determinants. It is also the first to include both de facto and de jure financial integration measures in a single study. This is also the first largest comparative study on bank profitability in Africa.

This paper aims to seek to find answers to three questions. First, is there any possibility of long-term cointegration between East and Southeast Asian equity markets? If so, how many cointegrating equations are there? Second, what are the short-term causal relationships between equity markets in East and Southeast Asia? Third, what is the East Asia’s most influential equity market toward their Southeast counterparts, and vice versa?

This study uses Johansen's (1988) cointegration method to test long-run relationships among East and Southeast Asian equity markets. With regards to short-run causal relationships, this study uses Granger-causality test as well as the forecast variance decomposition method.

Johansen test proves that there is cointegration between East and Southeast Asian equity markets, but the integration process is not complete. Cointegrating vector also provides evidence that member countries of ASEAN+3 respond differently to external shocks. With regards to short-run causal direction, this study finds that Japan Granger-causes all equity markets in Southeast Asia, while Singapore and Vietnam Granger-cause all equity markets in East Asia. These results imply that Japan is the market with most linkages in Southeast Asia, while Singapore and Vietnam are the markets with most linkages to East Asia. Furthermore, forecast variance decomposition reveals that Japan is the East Asia’s most influential equity markets, while Singapore is the most influential equity market in Southeast Asia. This study suggests that policymakers in East and Southeast Asian countries to synchronize the capital market standards and regulations as well as to reduce the barriers for capital mobility to spur the regional equity market integration.

Increasing integration of East and Southeast Asian capital markets forces policymakers in ASEAN+3 countries to synchronize monetary policies, as it has been found that regionally integrated capital markets reduce the degree of independent monetary policy (Logue et al., 1976). It is therefore important for policymakers in East and Southeast Asian countries to assess the possibility of stock market integration within this region to anticipate the future risks associated with economic integration as well as to build collective regional institutions (Wang, 2004). Click and Plummer (2005) also argued that integrated stock markets is more efficient than nationally segmented equity markets, and the efficiency of Asian capital markets has been questioned in particular after the 1997 Asian financial crises. Yet, the empirical evidence on the extent of financial integration among ASEAN+3 member countries has been limited and inconclusive. This study is therefore an attempt to investigate the recent development of ASEAN+3 equity markets integration.

This study focuses its attention on the existence and the extent of financial integration in East and Southeast Asia region, and it provides evidence that equity market integration in ASEAN+3 is far from complete, and for that reason, there is a need for policymakers in ASEAN+3 member countries to synchronize their standards and regulations. Furthermore, the policymakers in East and Southeast Asia can gain benefit from this study, as it provides the evidence that ASEAN+3 member countries respond differently to policy shocks, which may hinder the development of regional financial integration as well as the policy effectiveness of region-wide authority in ASEAN+3.

This research is different from previous studies, as it puts the regional financial integration within the context of ASEAN+3 frameworks. Unlike previous research that considers East and Southeast Asian countries as an individual entity, this research considers East and Southeast Asia into two different blocks, following Tourk (2004) who documented that negotiation process for ASEAN+3 financial integration is conducted in sub-regional level (ASEAN vs East Asia), rather than national level (country per country basis). Second, this study covers the period after the 1997 Asian financial crisis. As suggested in Wang (2014), that the degree of stock market integration tends to change around the periods marked by financial crises, the updated study on Asian financial integration in the aftermath of 1997 financial crises is important to document the development of regional financial integration.

This chapter measures financial integration in 10 industries over 4 different periods. We use two robust measures of integration: (i) the Pukthuanthong and Roll (2009)’s multi-factor R-square and (ii) the Volosovych (2011)’s integration index. Both measures, based on PCA, indicate that the difference between the level of integration over the period 2009–2012 (“Post-Lehman” era) and the level of integration over the period 1994–1998 (“Post-Liberalizations” era) is relatively high. In addition, the level of financial integration across international equity markets decreased during the late 1990s. This suggests that de jure integration does not necessarily improve de facto integration. Overall, our findings give rise to a “diversification benefits-insurance benefits trade-off.”

The strategic partnership between China and ASEAN has resulted in significant financial reforms at the country and regional level. The scale and pace of these changes call for systematic assessments of their bearing on the development and integration of financial markets in this region. The purpose of this paper is to investigate the level of financial integration of the equity markets in China and ASEAN4 countries (Indonesia, Malaysia, Philippines, and Thailand) for the period 2004-2014.

The authors use the β and σ convergence, dynamic conditional correlation, and wavelet correlation to assess the degree, trend, and change across different time scales of the integration of China-ASEAN4 equity markets. Using two measures of change in return per unit risk and variance, we assess the difference in diversification benefits between an equity portfolio China-ASEAN4 and China-EU.

The authors find that financial integration across China-ASEAN4 equity markets fluctuated between a moderate level before and after the recent crisis and a higher level during the crisis. The results indicate that investors achieve higher diversification benefits from a cross-industry than a cross-country investment strategy within this region.

Future research should investigate whether local factors and existing cultural and political differences explain the weak to moderate level of integration of China and emerging ASEAN equity markets.

A good understanding of the degree and evolution of the regional financial integration may be used by investors to allocate capital efficiently when adding ASEAN4 equities to a portfolio of Chinese equities.

Systematic assessments of the regional financial integration contribute to the effort to mitigate the ensuing cross-border financial contagion during crises.

The authors argue that that the increase in correlations of CHINA-ASEAN4 equity markets during the recent crisis does not reflect a permanent shift in the dynamic of the dominant markets in the region. While investors achieve higher diversification benefits from a cross-industry than a cross-country investment strategy within this region, the diversification benefits are lower for long-term than short-term investors.

In this chapter we use a new data weighting process to examine the relationships between stock market returns in major Southeast Asian nations. Investigation is then directed to financial integration between those ASEAN countries and the larger Asia-Pacific region.

The findings indicate that, after the Asian financial crisis, financial integration has continued in most ASEAN countries and between ASEAN countries and the larger Asia-Pacific region. Such effects can be accounted for by the forgetting factor technique. This new technique will provide revenue managers with a decision-making tool to evaluate some complex underlying relationships which managers cannot comprehend prima facie.

The purpose of this paper is to econometrically investigate the level of financial co-integration of the least developed countries (LDCs) of Asia and Pacific region. In addition, the paper also tested the co-integration of LDCs with the world’s second largest economy “China.” For this, the paper employed the foreign exchange data sets of respective LDCs. It also aimed to assess the dynamic conditional correlation (DCC) between the foreign exchange rates of LDCs and China, and further, examined the past and current level of their co-relational dependence.

The authors created data sets namely LDCs of Asia and Pacific, LDCs of SAARC, LDCs of ASEAN, LDCs of Pacific, LDCs of SAARC and ASEAN, LDCs of ASEAN and Pacific, and LDCs of SAARC and Pacific. In addition, the authors tested the co-integration of these seven groups with China, and thus, making a total of 14 data sets. The analysis was carried out using the Johansen and Gregory-Hansen multivariate co-integration econometric techniques. To assess the DCC, multivariate DCC GARCH model was employed.

It was found that at the intra-regional level, exchange rates of LDCs of SAARC, ASEAN and Pacific were co-integrated and showed the existence of 1-3 co-integrating equations. At inter-regional level SAARC-ASEAN, ASEAN-Pacific and SAARC-Pacific were also co-integrated and showed 1-3 co-integrated equations. However, on the inclusion of China in the study, the degree of co-integration of exchange rate of China with LDCs of SAARC and ASEAN increased, while with Pacific, the result was mixed. Conditional correlation estimated of multivariate DCC GARCH model suggested that except for Afghanistan, there was an upward shift in the correlation dynamics of exchange rates of LDCs with China, post global financial crisis.

Asia and Pacific region constituted of 53 countries, of which 13 were LDCs. Enhanced financial integration among LDCs of Asia-Pacific region and also between LDCs and major economies of the region like China will strengthen economic and financial integration efforts in the region.

The present paper attempted a comparative assessment of the co-movements of the foreign exchange markets of LDCs, the countries which have remained largely neglected in academic discourses on financial integration.

This paper contains an empirical analysis of determinants of international integration projects over the time period 1995-2010. After a broad discussion of the existent literature, the investigation combines a large number of potentially relevant determinants for the explanation of whether stock exchanges are participating in formal integration projects. The paper aims to discuss these issues.

The methodology is based on multistage statistical data analysis, using correlation and cluster analyses to investigate the presence of integration trend between existing stock exchange projects, while multivariable logit regression examines the determinants of stock exchange integration.

The paper confirms empirically the set of drivers of financial integration. Moreover, the paper provides quantitative estimations of probability of stock exchange integration estimated for different explanatory variables. The paper demonstrates that financial harmonization, cross-membership-agreements, for-profit corporate structure, trading engine and regional integration are important drivers of stock exchange integration. By contrast, high size of stock exchange market has negative impact on the likelihood of successful merger. This result is, especially, important in terms of financial regulation.

Results highlight the importance of stock exchange market in terms of exposure to systemic shocks and the linkages with the overall size of the economy.

The paper contributes to the existing literature and extends the analysis of determinants of stock exchange integration. In particular, the existence of de jure stock market integration projects suggests to design a special regulatory framework in order to benefit the important consequences of the integration phenomenon and to decrease the risk of financial contagion.

This study examines the co-integration relationships between Association of Southeast Nations (ASEAN) stock indices as a way to assess the feasibility of policy initiatives to strengthen market integration in ASEAN and identify implications for portfolio investors.

The authors employ threshold co-integration tests and a non-linear autoregressive distributed lag (NARDL) model to study the asymmetric dynamics of ASEAN equity markets. The study’s data cover the 2009–2022 period for seven member states: Cambodia, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The authors find evidence supporting co-integration relationships; adjustment toward equilibrium is asymmetric in the short run and symmetric in the long run for these countries. While co-movement in ASEAN equity markets seems encouraging for initiatives seeking to foster financial integration in regional economies, the benefits for international portfolio diversification appear to be neutralized.

The issue of stock market integration is important among policymakers, investors and academics. This study examines the level of stock market integration in ASEAN during the 2009–2022 period. For this purpose, advanced co-integration techniques are applied to different frequencies of data (daily, weekly and monthly) for comparison and completeness. The empirical analysis of this study is conducted using the Enders and Siklos (2001) co-integration and threshold adjustment procedure. This advanced co-integration technique is superior compared to other co-integration techniques by permitting asymmetry in the adjustment toward equilibrium.

This study examines the impact of regional economic integration (REI) on stock market linkages in the BRICS (Brazil, Russia, India, China and South Africa) economic bloc. In this type of study, the BRICS framework is an appealing empirical case, given its uncommon characteristics. For example, BRICS member states come from remote geographic locations (Africa, Asia, Europe and South America) and have contrasting socioeconomic profiles.

An empirical design is framed from the perspective of bilateral trade between South Africa and BRIC. The author accepts trade intensity as a proxy of regional economic integration and then examines the resulting effect on the stock market co-movement within BRIC. The study applies a two-step econometric procedure of the BEKK-MGARCH and panel data models.

Overall, bilateral trade, as a proxy of economic inwctegration, is associated with an increase in stock market integration. This positive relationship is particularly observed during episodes of surplus trade, and more interestingly, was initiated three years after BRICS’ existence and continues to grow at an increasing rate.

The study outcome should benefit international trade practitioners and global investors interested in portfolio diversification or concerned with risk spillovers.

First, notwithstanding South Africa's significant economic presence in the African continent, to the best of the author’s knowledge, this is the first study to empirically evaluate the BRICS economic integration on their stock market linkages from the perspective of South Africa. The value of this contribution is that further work may investigate the bidirectional spillover impact conveyed by South Africa's trade interactions within the juxtaposition of Africa and BRICS economies. Second, given that research on REI and stock market integration has historically concentrated on mature regional blocs of Europe, Asia, South and North America, the current study advances knowledge while correcting the prevailing literature imbalance.