In-Depth Analysis of ASEAN Stock Markets’ Diversification Benefit under Vector Autoregressive Model
In-Depth Analysis of ASEAN Stock Markets’ Diversification Benefit under Vector Autoregressive Model

Summary/Abstract: After the ASEAN Trading Link was established in 2011 in order to connect the ASEAN stock markets together, more developed information technology permits the more market integration of this region through the network of brokerage firms in the member countries. However, the integration of ASEAN countries is not limited to only the stock markets but also other economic fundamentals. As a result, ASEAN members could become more similar which, in turn, may affect those investing in ASEAN stock market. To prove that the stock market integration may not support the sustainable returns for investors, this research examines the reduction in the diversification benefit of the portfolio which includes the stocks from different ASEAN markets. The finding from VAR model shows that the more combined ASEAN countries’ economies could negatively affect investors who focus on lowering their risk by spreading their investment in different ASEAN’s stock markets.

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