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Are the ASEAN stock markets integrated with the US market ? new evidence from wavelet coherence

Musa, Mustafa and Masih, Mansur (2016): Are the ASEAN stock markets integrated with the US market ? new evidence from wavelet coherence.

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Abstract

It is generally believed that the US subprime crisis affected the ASEAN stock markets heavily. The main purpose of this paper is to look at the effects and performance of the stock markets of the big three ASEAN member countries such as Singapore, Malaysia and Indonesia against the influence of a larger economy such as, the United States. The method considered appropriate for the analysis is wavelet coherence. The findings tend to indicate that the co-movements between all these stock markets change significantly over time and across frequencies. We find that there is a strong coherence between the US stock market and the Singaporean, Malaysian and Indonesian stock markets. Furthermore, we find that there is a strong coherence between Singaporean and Malaysian markets in the long term. The results are intuitive and plausible with strong policy implications.

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