Assessing Philippine stock market integration: Evidences from the 2008 credit crisis

• Main Authors: De Vera, Emmanuel Nikole, Wong, Billy Choi, Yatco, Francis, Yu, Desiree Joyce
• Format: text
• Language: English
• Published: Animo Repository 2010
• Subjects: Stock exchanges; Stock price indexes; Stocks > Prices; Stock exchanges > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18328
• Institution: De La Salle University

The paper aims to assess the existence of integration between the Philippine stock market and the ASEAN 5+3 and US stock markets. The researchers used both daily and weekly closing stock price indices of all nine (9) countries from January 2000 to January 2010. Testing will be done for the full sample and for two (2) periods, namely the pre crisis (2000-2007) and crisis period (2008-2010), to show the effect of the 2008 credit crisis in the degree of integration among the countries. Using the Johansen and Julius vector error correction model (VECM) approach, the researchers were able to verify that almost all stock markets, except for China and Thailand, influence the long run relationship among stock price indices for the full daily data. Compared to its developing neighbors, the Philippines is adversely affected by well-developed markets such as US, Japan and Singapore. Furthermore, during the crisis, more variable contributed to the long run equilibrium of the stock markets and that the speed of adjustment coefficients became faster implying that the crisis strengthened the degree of integration among stock markets. The weekly samples showed a similar result with daily data but with greater magnitude providing stronger speed of adjustments and more volatile impulse responses and variance decomposition. The paper concludes that the Philippines is integrated with the other markets tested with the recent credit crisis strengthening the integration process. The Philippine's close stock market ties with developed economies also makes it more feasible for it to integrate with regional markets to achieve financial stability.