The relationship and cointegration of the Stock Indices, Foreign Exchange Rates, and Government Benchmark Bond yields through regression, causality, and cointegration analysis of selected ASEAN+3 markets for the period 2007-2014

• Main Author: Diokno, Andres Basilio A.
• Format: text
• Language: English
• Published: Animo Repository 2015
• Subjects: Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18068
• Institution: De La Salle University

This study focused on the relationship, causality, and cointegration of the stock indices, foreign exchange rates, and government benchmark fond yields of each of the selected ASEAN + 3 member states and as a whole.The study used OLS multivariate regression, Granger causality test and Johansen test of cointegration. The results showed varying results in terms of relationships. Notable results per country analysis results include how most countries exhibit a direct relationship between the foreign exchange movement and stock index returns, i.e., when a currency appreciates, so should the stock index. This holds true for all selected ASEAN + 3 markets except Japan. For international analysis, it is shown how most stock index returns have relationships with each other as compared to foreign exchange movements, and ten-year government benchmark yields. This study also gave evidence as to how markets may have different international relationships caused by their nature, size or development. The external markets exhibit joint significance to each of the selected ASEAN markets. The +3 also exhibits a joint significance to each of the ASEAN members. Causality was also seen in each of the countries - i.e. every country's stock, foreign exchange, and government bond markets have a degree of causality between each other. The results of the Johansen test of cointegration presented that the ASEAN + 3 markets are partially co-integrated with each other, with a maximum of eight co-integrating vectors. The results shed some light on the relationships, causality, and cointegration of the ASEAN + 3 markets and showed how this could benefit the different stakeholders such as businesses, investors, government, and academe.