Abstract
ASEAN nations started ASEAN Economic Community (AEC) initiatives, with the goal of improving the economic movement in ASEAN. The initiative is expected to lead to higher integration in the regions. The objective of this research was to study the integration of equity markets in the ASEAN-5 nations (Indonesia, Malaysia, Singapore, Thailand, and the Philippines), particularly those involving the Indonesian stock market (Indonesia’s economy is the largest in the region), and to analyze the diversification opportunities among ASEAN equity exchanges. Theoretically, capital markets in these nations should be more integrated following the introduction of AEC due to the integration of their economy and removal of several investment restrictions, including foreign ownership limitation. The data used was weekly data was used from January 2000 to June 2019, which was divided into four periods: pre-crisis, crisis, post-crisis and AEC. The methods used were DCC-GARCH, AG-DCC, volatility spillovers, Granger causality and diversification ratio from the mean-variance framework. The results showed robust evidence that there were still less integrated equity markets in ASEAN-5. The volatility spillover declined during the post-crisis period and was relatively stable during the AEC period. This result implies that ASEAN-5 initiatives have an impact on the capital markets. However, the implementation of the AEC is still far from successful since the equity exchanges have become less integrated than in the post-crisis period. Investors in Malaysia, Singapore, and the Philippines are encouraged to avoid investing heavily in Indonesia and Thailand equities during market turmoil since both are net contributors to volatility.
Acknowledgements
Not Applicable
Disclosure statement
No potential conflict of interest was reported by the authors.
Availability of data and materials
The datasets used and/or analyzed during the current study are available from the corresponding author on reasonable request.
Authors’ contributions
All the authors have made an equal contribution to this study.
Additional information
Funding
Notes on contributors
![](/cms/asset/de3e4b41-992f-4c1d-8a16-6224cec205c1/oabm_a_2167292_ilg0001.jpg)
Robiyanto Robiyanto
Robiyanto Robiyanto is an Associate Professor from Satya Wacana Christian University, Salatiga, Indonesia. He is active as an academic researcher; his research interests are capital market, commodity market, market efficiency, corporate governance, and portfolio management.
Bayu Adi Nugroho
Bayu Adi Nugroho obtained his Master degree from University of New South Wales, Australia. He is active as an academic researcher. His research interests are the capital market and portfolio management.
Eka Handriani
Eka Handriani is an Associate Professor from Faculty of Economics and Business, Darul Ulum Islamic Centre Sudirman University GUPPI, Ungaran, Indonesia. Her research interests are capital market, corporate finance, and corporate governance.
Budi Frensidy
Budi Frensidy is a Full Professor in Capital Market from Universitas Indonesia, Depok, Indonesia.