Indonesian Stock Market Integration: Major Trading Partners vs. Regional Markets

• Main Authors: Nely -, 曹毅莉
• Other Authors: Yi-Chein Chiang
• Format: Others
• Language: en_US
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/71089573967635277202

碩士 === 逢甲大學 === 國際貿易所 === 98 === This study examines the long run stock market relationship between Indonesia and its major trading partners (Japan, U.S., and Singapore) and compare it with long run stock market relationship between Indonesia and its regional markets (Singapore, Malaysia, Thailand, and Philippine). Then Singapore is alternately included and excluded from both models. This study uses cointegration approach and takes into account the interdependence of stock prices and foreign exchange rates in the model. It also studies the effect of financial crisis on these stock markets co-movements. VAR/VECM is used to estimate the interdependence between stock markets and exchange rates and the dynamics of the system. Impulse response function is used to examine the short-run dynamic interactions among the variables in the system. The results suggest that Indonesian stock market is more cointegrated with its regional stock markets than with stock markets of its major trading partners. And this cointegration relationship strengthened during crisis and after crisis. The VAR and VECM results show that the dependence of Indonesian stock market upon its past value and other stock markets remains unchanged whether when Singapore is included or excluded from the models. The impulse response analysis indicates that shock from stock markets has greater effect on Indonesian stock markets relative to shock from exchange rates.