UNDERSTANDING ASIAN EMERGING STOCK MARKETS
Keywords:
Efficiency, Asia, Multifractal, Volatility
Abstract
We use a three-step process employing multifractal detrended fluctuation analysis to
study time-varying changes in the volatility and efficiency of Asian emerging equity
markets. Our findings suggest that, in emerging markets, long-term stability and
efficiency are linked to market development and liberalization. Our findings further
suggest that financial crises have a negative impact on the efficiency of emerging
markets but only in the short term.
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References
Abiad, A., Daniel L. H., and Ashoka M. (2009). Financial Integration, Capital
Mobility, and Income Convergence. Economic Policy, 24, 241–305.
Alam, N., Arshad, S., and Rizvi, S.A.R. (2016). Do Islamic Stock Indices Perform
Better Than Conventional Counterparts? An Empirical Investigation of Sectoral
Efficiency. Review of Financial Economics, 31, 108-114.
Aloui, R., Aïssa, M.S.B., and Nguyen, D.K. (2011). Global Financial Crisis, Extreme
Interdependences, and Contagion Effects: The Role of Economic Structure?
J. Bank. Finance, 35, 130-141
Arshad, S., Rizvi, S.A.R., and Ibrahim, M.H. (2014). Tripartite Analysis Across
Business Cycles in Turkey: A Multi-Timescale Inquiry of Efficiency, Volatility
and Integration. Borsa Istanbul Review, 14, 224-235.
Arshad, S., and Rizvi, S.A.R. (2015). The Troika of Business Cycle, Efficiency and
Volatility: An East Asian Perspective. Physica A: Statistical Mechanics and its
Applications, 419, 158–170.
Arshad, S., and Rizvi, S.A.R. (2015). The Troika of Business Cycle, Efficiency and
Volatility: An East Asian Perspective. Physica A: Statistical Mechanics and its
Applications, 419, 158–170.
Atje, R., and Boyan, J. (1993). Stock Markets and Development. European Economic
Review 37, 632‐640.
Beck, T., and Levine, R. (2005). Legal Institutions and Financial Development. In:
Menard, C., Shirley, M. (Eds.), Handbook for New Institutional Economics. Kluwer
Academic Publishers, Norwell, MA.
Bekaert, G., and Harvey, C.R. (1998). Capital Markets: An Engine for Economic
Growth. Brown Journal of World Affairs, 5, 33-58.
Bekaert, G., Harvey, C.R., and Lundblad, C. (2007). Liquidity and Expected
Returns: Lessons from Emerging Markets. Review of Financial Studies, 20, 1783-
1831.
Bell, C., and Rousseau, P.L. (2001). Post-Independence India: A Case of Finance-
Led Industrialization. Journal of Development Economics, 65, 153–175.
Cajueiro, D.O., Gogas, P., and Tabak, B.M. (2009). Does Financial Market
Liberalization Increase the Degree of Market Efficiency? The Case of the
Athens Stock Exchange. International Review of Financial Analysis, 18, 50-57.
Campos, N.F., Karanasos, M.G., and Tan, B. (2012). Two to Tangle: Financial
Development, Political Instability and Economic Growth in Argentina. Journal
of Banking and Finance, 36, 290–304.
Caporale, G.M., Howells, P.G.A., and Soliman, A.M. (2004). Stock Market
Development and Economic Growth: The Causal Linkage. Journal of Economic
Development, 29.
Chordia, T., Roll, R., and Subrahmanyam, A. (2008). Liquidity and Market
Efficiency. Journal of Financial Economics, 87, 249-268.
Claessens, S., Dasgupta, S., and Glen, J. (1995). Return Behaviour in Emerging
Stock Market. The World Bank Economic Review, 9, 131-151.
Debata, B., S. R. Dash, and J. Mahakud. (2017). Investor Sentiment and Emerging
Stock Market Liquidity. Finance Research Letters, 26, 15-31.
Dewandaru, G., Rizvi, S.A.R., Masih, R., Masih, M., and Alhabshi, S.O. (2014). What
Factors Explains Stock Market Retardations In Islamic Countries? Emerging
market Review, 19, 106-127.
Dimitriou, D., Kenourgios, D., and Simos, T. (2013). Global Financial Crisis
and Emerging Stock Market Contagion: A Multivariate FIAPARCH–DCC
Approach. International Review of Financial Analysis, 30, 46–56.
Faiq, M, Xinping, X., Shahid, H., and Usman, M. (2010). Chinese Stock Market
Efficiency. Asian Journal of Management Research, 1, 268-282.
Ferdandes, N. (2005). Portfolio Disaggregation in Emerging Market Investments.
Journal of Portfolio Management, winter, 41-49.
Griffin, J.M., Kelly, P., and Nardari F. (2010). Do Market Efficiency Measures Yield
Correct Inferences? A Comparison of Developed and Emerging Markets. The
Review of Financial Studies, 23, 3225–3277.
Guidi, F., and Gupta, R. (2011). Are ASEAN Stock Market Efficient? Evidence
from Univariate and Multivariate Variance Ratio Tests. Discussion Papers in
Finance: 201113, Griffith University.
Guo, F., Huang, Y.S. (2010). Does “Hot Money” Drive China’s Real Estate and
Stock Markets? International Review of Economics & Finance, 19, 452-466.
Hammoudeh, S., and Choi, K. (2007). Characteristics of Permanent and Transitory
Returns in Oil-Sensitive Emerging Stock Markets: The Case of the GCC
Countries. International Review of Economics and Finance, 17, 231-245
Henry, P.B. (2000). Stock Market Liberalization, Economic Reform, and Emerging
Market Equity Prices. Journal of Finance, 55, 529-564.
Hoque H., Jae H.K., and C.S. Pyun. (2007). A Comparison of Variance Ratio Tests of
Random Walk: A Case of Asian Emerging Stock Markets. International Review
of Economics and Finance, 16, 488-502.
Hull, M., and McGroarty, F. (2014). Do Emerging Markets Become More Efficient
as They Develop? Long Memory Persistence in Equity Indices. Emerging
Markets Review, 18, 45-61.
Islamaj, E. (2014). Industrial Specialization, Financial Integration and International
Consumption Risk Sharing. The B.E. Journal of Macroeconomics- Contributions.
Jiang, Z-Q, and Zhou, W-Z. (2010). Complex Stock Trading Network Among
Investors. Physica A, 389, 4929-4941.
Kantelhardt, J. W., Zschiengerm, S. A., Koscienly-Bunde, E., Havlin, S., Bunde,
A., and Stanley, H. E. (2002). Multifractal Detrended Fluctuation Analysis of
Nonstationary Time Series. Physica A, 316, 87-114.
Kim, E. Han, and Vijay Singal. (2000). Stock Market Openings: Experience of
Emerging Economies. Journal of Business, 73, 25–66.
Kim, J.H., and Shamsuddin, A. (2008). Are Asian Stock Markets Efficient? Evidence
from New Multiple Variance Ratio Tests. Journal of Empirical Finance 15, 518-
532.
Kim, W., and Wei, S. J. (2002). Foreign Portfolio Investors Before and During A
Crisis. Journal of International Economics, 56, 77-96.
Lesmond, D.A. (2005). Liquidity of Emerging Markets. J. Financial Econ, 77, 411–
452.
Levine, R., and Zervos, S. (1993). What We Have Learned About Policy and Growth
From Cross-Country Regressions. American Economic Review, 83, 426-430.
Lim, K. P., and Brooks, R. (2011). The Evolution of Stock Market Efficiency Over
Time: A Survey of the Empirical Literature. Journal of Economic Surveys, 25,
69-108.
Luintel, K.B., and Khan, M. (1999). A Quantitative Reassessment of the Finance–
Growth Nexus: Evidence from A Multivariate VAR. Journal of Development
Economics, 60, 381–405.
McKinnon, R. (2013). The Unloved Dollar Standard: From Bretton Woods to the Rise of
the [People’s Republic of] China. Oxford, UK: Oxford University Press.
Menkhoff, L., Sarno, L., Schmeling, M., and Schrimpf. A., (2012). Currency
Momentum Strategies. Journal of Financial Economics, 106, 660–684.
Mishra, S., and Narayan, P.K. (2015). A Nonparametric Model of Financial System
and Economic Growth. International Review of Economics and Finance, 39, 175–
191.
Narayan, P.K., and Narayan, S. (2013). The Short-Run Relationship Between the
Financial System and Economic Growth: New Evidence from Regional Panels.
International Review of Financial Analysis, 29, 70–78.
Nelson, D. B. (1991). Conditional Heteroskedasticity in Asset Returns: A New
Approach. Econometrica, 59, 347—370.
Rizvi, S.A.R., Arshad, S., and Alam, N. (2015). Crises and Contagion in Asia Pacific
- Islamic V/S Conventional Markets. Pacific-Basin Finance Journal, 34, 315-326.
Rizvi, S.A.R., Arshad, S., and Alam, N. (2015). A Tripartite Inquiry Into Volatility-
Efficiency-Integration Nexus - Case of Emerging Markets. Emerging Market
Review, 34, 143-161.
Rizvi, S.A.R., Dewandaru, G., Bacha, O.I., and Masih, M. (2014). An Analysis of
Stock Market Efficiency: Developed vs Islamic Stock Markets Using MF-DFA.
Physica A: Statistical Mechanics and its Applications 407, 86-99.
Rizvi, S.A.R., Dewandaru, G., Bacha, O.I., and Masih, M. (2014). An Analysis of
Stock Market Efficiency: Developed vs Islamic Stock Markets Using MF-DFA.
Physica A: Statistical Mechanics and its Applications 407, 86-99.
Rousseau, P. L., and Wachtel, P. (2000). Equity Markets and Growth: Cross-
Country Evidence on Timing and Outcomes, 1980-1995. Journal of Banking &
Finance, 24, 1933-1957.
Zhou, W.-X., Sornette, D., and Yuan W.-K. (2006). Inverse Statistics and
Multifractality of Exit Distances in 3D Fully Developed Turbulence. Physica
D, 214, 55-62.
Yang, A.S., and Pangastuti, A. (2016). Stock Market Efficiency and Liquidity:
The Indonesia Stock Exchange Merger. Research in International Business and
Finance, 36, 28-40.
Mobility, and Income Convergence. Economic Policy, 24, 241–305.
Alam, N., Arshad, S., and Rizvi, S.A.R. (2016). Do Islamic Stock Indices Perform
Better Than Conventional Counterparts? An Empirical Investigation of Sectoral
Efficiency. Review of Financial Economics, 31, 108-114.
Aloui, R., Aïssa, M.S.B., and Nguyen, D.K. (2011). Global Financial Crisis, Extreme
Interdependences, and Contagion Effects: The Role of Economic Structure?
J. Bank. Finance, 35, 130-141
Arshad, S., Rizvi, S.A.R., and Ibrahim, M.H. (2014). Tripartite Analysis Across
Business Cycles in Turkey: A Multi-Timescale Inquiry of Efficiency, Volatility
and Integration. Borsa Istanbul Review, 14, 224-235.
Arshad, S., and Rizvi, S.A.R. (2015). The Troika of Business Cycle, Efficiency and
Volatility: An East Asian Perspective. Physica A: Statistical Mechanics and its
Applications, 419, 158–170.
Arshad, S., and Rizvi, S.A.R. (2015). The Troika of Business Cycle, Efficiency and
Volatility: An East Asian Perspective. Physica A: Statistical Mechanics and its
Applications, 419, 158–170.
Atje, R., and Boyan, J. (1993). Stock Markets and Development. European Economic
Review 37, 632‐640.
Beck, T., and Levine, R. (2005). Legal Institutions and Financial Development. In:
Menard, C., Shirley, M. (Eds.), Handbook for New Institutional Economics. Kluwer
Academic Publishers, Norwell, MA.
Bekaert, G., and Harvey, C.R. (1998). Capital Markets: An Engine for Economic
Growth. Brown Journal of World Affairs, 5, 33-58.
Bekaert, G., Harvey, C.R., and Lundblad, C. (2007). Liquidity and Expected
Returns: Lessons from Emerging Markets. Review of Financial Studies, 20, 1783-
1831.
Bell, C., and Rousseau, P.L. (2001). Post-Independence India: A Case of Finance-
Led Industrialization. Journal of Development Economics, 65, 153–175.
Cajueiro, D.O., Gogas, P., and Tabak, B.M. (2009). Does Financial Market
Liberalization Increase the Degree of Market Efficiency? The Case of the
Athens Stock Exchange. International Review of Financial Analysis, 18, 50-57.
Campos, N.F., Karanasos, M.G., and Tan, B. (2012). Two to Tangle: Financial
Development, Political Instability and Economic Growth in Argentina. Journal
of Banking and Finance, 36, 290–304.
Caporale, G.M., Howells, P.G.A., and Soliman, A.M. (2004). Stock Market
Development and Economic Growth: The Causal Linkage. Journal of Economic
Development, 29.
Chordia, T., Roll, R., and Subrahmanyam, A. (2008). Liquidity and Market
Efficiency. Journal of Financial Economics, 87, 249-268.
Claessens, S., Dasgupta, S., and Glen, J. (1995). Return Behaviour in Emerging
Stock Market. The World Bank Economic Review, 9, 131-151.
Debata, B., S. R. Dash, and J. Mahakud. (2017). Investor Sentiment and Emerging
Stock Market Liquidity. Finance Research Letters, 26, 15-31.
Dewandaru, G., Rizvi, S.A.R., Masih, R., Masih, M., and Alhabshi, S.O. (2014). What
Factors Explains Stock Market Retardations In Islamic Countries? Emerging
market Review, 19, 106-127.
Dimitriou, D., Kenourgios, D., and Simos, T. (2013). Global Financial Crisis
and Emerging Stock Market Contagion: A Multivariate FIAPARCH–DCC
Approach. International Review of Financial Analysis, 30, 46–56.
Faiq, M, Xinping, X., Shahid, H., and Usman, M. (2010). Chinese Stock Market
Efficiency. Asian Journal of Management Research, 1, 268-282.
Ferdandes, N. (2005). Portfolio Disaggregation in Emerging Market Investments.
Journal of Portfolio Management, winter, 41-49.
Griffin, J.M., Kelly, P., and Nardari F. (2010). Do Market Efficiency Measures Yield
Correct Inferences? A Comparison of Developed and Emerging Markets. The
Review of Financial Studies, 23, 3225–3277.
Guidi, F., and Gupta, R. (2011). Are ASEAN Stock Market Efficient? Evidence
from Univariate and Multivariate Variance Ratio Tests. Discussion Papers in
Finance: 201113, Griffith University.
Guo, F., Huang, Y.S. (2010). Does “Hot Money” Drive China’s Real Estate and
Stock Markets? International Review of Economics & Finance, 19, 452-466.
Hammoudeh, S., and Choi, K. (2007). Characteristics of Permanent and Transitory
Returns in Oil-Sensitive Emerging Stock Markets: The Case of the GCC
Countries. International Review of Economics and Finance, 17, 231-245
Henry, P.B. (2000). Stock Market Liberalization, Economic Reform, and Emerging
Market Equity Prices. Journal of Finance, 55, 529-564.
Hoque H., Jae H.K., and C.S. Pyun. (2007). A Comparison of Variance Ratio Tests of
Random Walk: A Case of Asian Emerging Stock Markets. International Review
of Economics and Finance, 16, 488-502.
Hull, M., and McGroarty, F. (2014). Do Emerging Markets Become More Efficient
as They Develop? Long Memory Persistence in Equity Indices. Emerging
Markets Review, 18, 45-61.
Islamaj, E. (2014). Industrial Specialization, Financial Integration and International
Consumption Risk Sharing. The B.E. Journal of Macroeconomics- Contributions.
Jiang, Z-Q, and Zhou, W-Z. (2010). Complex Stock Trading Network Among
Investors. Physica A, 389, 4929-4941.
Kantelhardt, J. W., Zschiengerm, S. A., Koscienly-Bunde, E., Havlin, S., Bunde,
A., and Stanley, H. E. (2002). Multifractal Detrended Fluctuation Analysis of
Nonstationary Time Series. Physica A, 316, 87-114.
Kim, E. Han, and Vijay Singal. (2000). Stock Market Openings: Experience of
Emerging Economies. Journal of Business, 73, 25–66.
Kim, J.H., and Shamsuddin, A. (2008). Are Asian Stock Markets Efficient? Evidence
from New Multiple Variance Ratio Tests. Journal of Empirical Finance 15, 518-
532.
Kim, W., and Wei, S. J. (2002). Foreign Portfolio Investors Before and During A
Crisis. Journal of International Economics, 56, 77-96.
Lesmond, D.A. (2005). Liquidity of Emerging Markets. J. Financial Econ, 77, 411–
452.
Levine, R., and Zervos, S. (1993). What We Have Learned About Policy and Growth
From Cross-Country Regressions. American Economic Review, 83, 426-430.
Lim, K. P., and Brooks, R. (2011). The Evolution of Stock Market Efficiency Over
Time: A Survey of the Empirical Literature. Journal of Economic Surveys, 25,
69-108.
Luintel, K.B., and Khan, M. (1999). A Quantitative Reassessment of the Finance–
Growth Nexus: Evidence from A Multivariate VAR. Journal of Development
Economics, 60, 381–405.
McKinnon, R. (2013). The Unloved Dollar Standard: From Bretton Woods to the Rise of
the [People’s Republic of] China. Oxford, UK: Oxford University Press.
Menkhoff, L., Sarno, L., Schmeling, M., and Schrimpf. A., (2012). Currency
Momentum Strategies. Journal of Financial Economics, 106, 660–684.
Mishra, S., and Narayan, P.K. (2015). A Nonparametric Model of Financial System
and Economic Growth. International Review of Economics and Finance, 39, 175–
191.
Narayan, P.K., and Narayan, S. (2013). The Short-Run Relationship Between the
Financial System and Economic Growth: New Evidence from Regional Panels.
International Review of Financial Analysis, 29, 70–78.
Nelson, D. B. (1991). Conditional Heteroskedasticity in Asset Returns: A New
Approach. Econometrica, 59, 347—370.
Rizvi, S.A.R., Arshad, S., and Alam, N. (2015). Crises and Contagion in Asia Pacific
- Islamic V/S Conventional Markets. Pacific-Basin Finance Journal, 34, 315-326.
Rizvi, S.A.R., Arshad, S., and Alam, N. (2015). A Tripartite Inquiry Into Volatility-
Efficiency-Integration Nexus - Case of Emerging Markets. Emerging Market
Review, 34, 143-161.
Rizvi, S.A.R., Dewandaru, G., Bacha, O.I., and Masih, M. (2014). An Analysis of
Stock Market Efficiency: Developed vs Islamic Stock Markets Using MF-DFA.
Physica A: Statistical Mechanics and its Applications 407, 86-99.
Rizvi, S.A.R., Dewandaru, G., Bacha, O.I., and Masih, M. (2014). An Analysis of
Stock Market Efficiency: Developed vs Islamic Stock Markets Using MF-DFA.
Physica A: Statistical Mechanics and its Applications 407, 86-99.
Rousseau, P. L., and Wachtel, P. (2000). Equity Markets and Growth: Cross-
Country Evidence on Timing and Outcomes, 1980-1995. Journal of Banking &
Finance, 24, 1933-1957.
Zhou, W.-X., Sornette, D., and Yuan W.-K. (2006). Inverse Statistics and
Multifractality of Exit Distances in 3D Fully Developed Turbulence. Physica
D, 214, 55-62.
Yang, A.S., and Pangastuti, A. (2016). Stock Market Efficiency and Liquidity:
The Indonesia Stock Exchange Merger. Research in International Business and
Finance, 36, 28-40.
Published
2019-02-27
How to Cite
Arshad, S., Rizvi, S. A. R., & Haroon, O. (2019). UNDERSTANDING ASIAN EMERGING STOCK MARKETS. Buletin Ekonomi Moneter Dan Perbankan, 21, 495-510. https://doi.org/10.21098/bemp.v0i0.983
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Articles
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