Equity Market Price Interdependence Between Australia and the Asian Tigers

Abstract

The study investigates the extent and structure of long-term and short-term price interaction between the equity markets of Australia and the Asian Tigers - Hong Kong, Korea, Singapore and Taiwan, taking into account the Asian financial crisis. It applies cointegration and generalised variance decomposition and impulse response analyses using MSCI price index data. No significant long-term relationship between Australia and the Asian Tigers is found both before and after the Asian crisis. No significant short-term relationship is also found during the period before the crisis. However, after the crisis, the study finds Australia to be significantly interdependent with Hong Kong and Singapore.

Keywords: equity market interdependence; Asian Tigers; cointegration; variance decomposition; impulse response; innovation accounting.