Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 31743
The Impact of Subsequent Stock Market Liberalization on the Integration of Stock Markets in ASEAN-4 + South Korea

Authors: Noor Azryani Auzairy, Rubi Ahmad


To strengthen the capital market, there is a need to integrate the capital markets within the region by removing legal or informal restriction, specifically, stock market liberalization. Thus the paper is to investigate the effects of the subsequent stock market liberalization on stock market integration in 4 ASEAN countries (Malaysia, Indonesia, Thailand, Singapore) and Korea from 1997 to 2007. The correlation between stock market liberalization and stock market integration are to be examined by analyzing the stock prices and returns within the region and in comparison with the world MSCI index. Event study method is to be used with windows of ±12 months and T-7 + T. The results show that the subsequent stock market liberalization generally, gives minor positive effects to stock returns, except for one or two countries. The subsequent liberalization also integrates the markets short-run and long-run.

Keywords: ASEAN, event method, stock market integration, stock market liberalization.

Digital Object Identifier (DOI):

Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 1698


[1] Haruhiko Kuroda, "How to Strengthen Banks and Develop Capital Markets in Post-Crisis Asia, presented at Financial Conference, 2002.
[2] Andrew Sheng, "Building national and regional financial markets: The East Asian experience", paper presented at the OECD/ADBI Eighth Roundtable on Capital Market Reform in Asia, ADBI, Tokyo, 11-12 October 2006.
[3] Peter B. Henry, "Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices," The Journal of Finance, vol. 55, no. 2, pp 529-564, 2000.
[4] Bekaert, Harvey and Lundblad, "Equity market liberalization in emerging markets," Federal Reserve Bank of St Louis Review, pp. 53(22), July/Aug 2003.
[5] Joseph E. Stiglitz, "Capital market liberalization and exchange rate regimes: risk without reward," The Annals of the American Academy of Political and Social Science, pp. 219(30), 2002.
[6] Lawrence H. Summers, "A changing course toward privatization, in GA" Galal and M. Shirley eds.: Does Privatization Deliver?, The World Bank, Washington, D.C., 1994.
[7] S. Iwata, S. Wu, "Stock market liberalization and international risk sharing," Journal of International Financial Markets, Institutions and Money, .Article in Press, 2008.
[8] Joseph E. Stiglitz, "Capital market liberalization and exchange rate regimes: risk without reward," The Annals of the American Academy of Political and Social Science, pp. 219(30), 2002.
[9] H. Kawakatsu and M. R. Morray, "An Empirical Examination of Financial liberalization and Efficiency of Emerging Market Stock Price", Journal of Financial Research, vol. 22, pp. 385-411, 1999.
[10] Nikiforos T. Laopodis, "Financial market liberalization and stock market efficiency: the case of Greece," Managerial Finance, vol. 30.11, pp. 68(1), 2004.
[11] Ilene Grabel, "Assessing the impact of financial liberalization on stock market volatility in selected developing countries, Journal of Development Studies, vol.31,.no. 6, pp. 903(15), 1995.
[12] Felix B. Kwan and Mario G. Reyes, "Price effects of stock market liberalization in Taiwan," Quarterly Review of Economics and Finance, vol. 37, no. 2, pp. 511(12), 1997.
[13] Ross Levine and Sara Zervos, "Capital control liberalization and stock market development," World Development, vol. 26, pp. 1169(14), 1998.
[14] Peter B. Henry, "Do stock market liberalizations cause investment al of Financial Economics," vol. 58(1-2), pp. 301-334,2000.
[15] K. Ha Bae, K. B. Chin and A. B. Ng, "Investibility and return volatility," Journal of Financial Economics, vol. 71 (2), pp. 239-263, 2004.
[16] Dilip K. Patro, "Stock market liberalization and emerging market country fund premiums," The Journal of Business, vol. 78.1, pp. 135(34), 2005.
[17] Chu-Sheng Tai, "Market integration and contagion: Evidence from Asian emerging stock and foreign exchange markets," Emerging Markets Review, vol. 8, pp. 264-283, 2007.
[18] Delroy M. Hunter, "The evolution of stock market integration in the post-liberalization period: A look at Latin America," Journal of International Money and Finance, vol. 25, pp. 795-826, 2006.
[19] Ahmad Zubaidi Baharumshah, Tamat Sarmidi and Hui Boon Tan, "Dynamic linkages of Asian stock markets: An analysis of preliberalization and post-liberalization eras," Journal of the Asia Pacific Economy, vol. 8(2), pp. 180-209, 2003.
[20] Vanitha Ragunathan, "Financial deregulation and integration: An Australian perspective," Journal of Economics & Business, , vol. 51 Issue 6, pp. 505(10), Nov/Dec 1999.
[21] Feng Guo, "Essays on East Asian capital markets: Integration and implications for economic activity," Ph.D. thesis. City University of New York, New York, U.S.A, 2005.
[22] Mei-Chen Lin, "Capital Market Integration and Market Liberalization in Asian Emerging Markets," International Journal of Management, vol. 22, no. 2, June 2005.
[23] Li Qi, "Three essays in emerging capital markets (China)," Ph.D. thesis. University of Pittsburgh, Pittsburgh, U.S.A., 2004.
[24] Kate Phylaktis, "Capital Market Integration in the Pacific Basin Region: An Analysis of Real Interest-Rate Linkages," IMF Working Paper, no. 95/133, 1995.
[25] H.L. Chuah, "The integration of international equity markets," Ph.D. thesis. Duke University, 2005.
[26] Tamim Bayoumi, "Consumption, Income, and International Capital Market Integration," IMF Working PaperNo. 94/120, 1994.
[27] H. Egger, P. Egger, J. Falkinger, and V. Grossmann, "International Capital Market Integration, Educational Choice and Economic Growth.," IZA Discussion Paper, no. 1863, Nov 2005..
[28] B.H. Solnik, "The international pricing of risk: an empirical investigation of the world capital market structure," The Journal of Finance, pp. 365-378, 2001.
[29] L. Fauver, J. Houston, A. Naranjo, "Capital Market Development, International Integration, Legal Systems, and Value of Corporate Diversification: A Cross-Country Analysis," Journal of Financial and Quantitative Analysis,vol. 38, no. 1, March 2003.
[30] C. Rowat and J. Dutta, "The Commons with Capital Markets," University of Birmingham Economics Working Paper, no. 05-19, Dec 2005.
[31] V. Errunza and E. Losq, "Capital flow controls, international asset pricing, and investors- welfare: a multi-country framework," Journal of Finance, vol. 44, pp. 1025-37, 1989.
[32] A. Tahai, Robert W. Rutledge, and Khondkar E. Karim, "An examination of financial integration for the group of seven (G7) industrialized countries using an I(2) cointegration model," Applied Financial Economics, vol. 14, pp. 327-335, 2004.