Capital market integration of ASEAN countries

Submission note: A thesis submitted in total fulfilment of the requirements for the degree of Doctor of Philosophy to the Department of Economics and Finance, La Trobe Business School, College of Arts, Social Sciences and Commerce, La Trobe University, Bundoora.

Capital market integration and relating issues are fascinating topics that have been studied intensively in the literature. The integration and/or segmentation of a capital market might imply the existence of an investment diversification benefit to investors. The countries in the Association of Southeast Asian Nations (ASEAN) have undergone dramatic economic and social changes in recent decades. However, there are significant gaps in the literature in relation to the development of capital markets in ASEAN countries. Therefore, this thesis focuses on investigating the history, institutions, and integration of the capital markets and industries of six selected ASEAN countries: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam (hereafter, 'ASEAN6'). The purpose of this thesis is to suggest opportunities for investment diversification among the ASEAN6. The analysis is conducted using time series and panel data modelling of stock returns from the US, Asia and the ASEAN6 markets. This is done by employing multivariate data analysis methods including static and systematic forward rolling regression models, Vector Autoregression (VAR), Vector Autoregression Moving Average Generalized Autoregressive Conditional Heteroskedasticity in Mean-Asymmetric Baba-Engle-Kraft-Kroner (VARMA-MGARCH-ABEKK) models. This study significantly contributes to the international finance literature in various ways. Firstly, it synthesizes and compares the development of the ASEAN6 capital markets to help investors understanding these markets before making their investment decisions. Second, it investigates the static and dynamic integration/segmentation of these ASEAN6 stock market returns and the channels of influence between the local and international markets using multivariate time series regressions and VAR models. Based on this information, it infers desirable choices of countries should investors invest to diversify their portfolios. Third, the thesis goes further by investigating the integration/segmentation of ASEAN6 stock industry returns and their volatilities in a VARMA-MGARCH-ABEKK model to select the best choice of industries within the ASEAN6 bloc for portfolio diversification. Finally, it analyses the relationships between some specific investment funds and ASEAN markets and their industries in panel data models to suggest some investment choices to investors.