Equity market linkages in the Asia Pacific region: A comparison of the orthogonalised and generalised VAR approaches

This study provides an empirical analysis of the linkages between markets, and the efficiency with which innovations between markets are transmitted in the Asia Pacific region, using two competing methodologies. Specifically, this study compares the generalised approach to forecast error variance de...

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Bibliographic Details
Published in:Global finance journal 2001-01, Vol.12 (1), p.1-33
Main Authors: Dekker, Arie, Sen, Kunal, Young, Martin R.
Format: Article
Language:English
Subjects:
Efficient markets
Forecasting techniques
Generalised VAR
Market linkages
Orthogonalised VAR
Regression analysis
Studies
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Summary:This study provides an empirical analysis of the linkages between markets, and the efficiency with which innovations between markets are transmitted in the Asia Pacific region, using two competing methodologies. Specifically, this study compares the generalised approach to forecast error variance decomposition and impulse response analysis to the more traditional orthogonalised approach. The findings of this study confirm earlier studies that show the Asia Pacific region to be characterised by informationally efficient equity markets, with a number of these markets showing strong linkages. More significantly, the generalised vector autoregression (VAR) approach is shown to give more realistic results, particularly for those markets with the closest geographical and economic links.
ISSN:1044-0283
1873-5665
DOI:10.1016/S1044-0283(01)00025-4