Measuring the effectiveness of ASEAN-5 initiatives from emerging market portfolio’s perspective

Figures & data

Table 1. Descriptive statistics

	Obs	Max	Min	Mean	Median	S. Dev	Normality	ADF at Level	ARCH(5)
STI	1015	0.15	−0.16	0.0003	0.0017	0.0249	0	−21.11*	152.90*
SET	1015	0.10	−0.26	0.0013	0.0037	0.0283	0	−13.54*	32.79*
PSEI	1015	0.16	−0.20	0.0013	0.0017	0.0281	0	−20.93*	17.19*
KLSE	1015	0.12	−0.11	0.0007	0.0013	0.0188	0	−30.09*	34.41*
JKSE	1015	0.12	−0.20	0.0021	0.0036	0.0302	0	−11.90*	66.48*

Source: Bloomberg, processed.

*Significance at 1% level; Normality was Jarque Bera Prob. With 5% level; ARCH(5) was the Obs*R-squared values

Notes: STI (Strait Times Index), SET (Stock Exchange Thailand), PSEI (The Philippine Stock Exchange Composite Index), KLSE (FTSE Bursa Malaysia Kuala Lumpur Composite Index), JKSE (Jakarta Composite Index)

Table 2. Correlation analysis

	STI	SET	PSEI	KLSE	JKSE
STI	1	0.5304*	0.4691*	0.5055*	0.5057*
SET	0.5304*	1	0.4666*	0.4453*	0.4668*
PSEI	0.4691*	0.4666*	1	0.4004*	0.5047*
KLSE	0.5055*	0.4453*	0.4004*	1	0.4555*
JKSE	0.5057*	0.4668*	0.5047*	0.4555*	1

Source: Bloomberg, processed.

*Significance at 1% level

Notes: STI (Strait Times Index), SET (Stock Exchange Thailand), PSEI (The Philippine Stock Exchange Composite Index), KLSE (FTSE Bursa Malaysia Kuala Lumpur Composite Index), JKSE (Jakarta Composite Index)

Table 3. DCC-GARCH results

All Sample
	JKSE- KLSE	JKSE-STI	JKSE-SET	JKSE-PSEI	Average
Min	0.1296	0.0105	−0.0005	0.1771
Max	0.7651	0.7457	0.7530	0.7634
Average	0.4365	0.4637	0.4153	0.4778	0.4483
Pre-Crisis
Min	0.1623	0.0105	−0.0005	0.1771
Max	0.6063	0.6982	0.6537	0.6552
Average	0.3641	0.4181	0.3734	0.4256	0.3953
Crisis Period
Min	0.4117	0.3904	0.3123	0.2671
Max	0.7651	0.7122	0.7530	0.7634
Average	0.6521	0.5603	0.4979	0.5786	0.5722
Post Crisis
Min	0.1296	0.2637	0.1775	0.2959
Max	0.6983	0.7457	0.6891	0.7048
Average	0.4649	0.5372	0.4455	0.5147	0.4906
ASEAN Economic Community (AEC)
Min	0.2444	0.1502	0.2384	0.3186
Max	0.6313	0.6487	0.6403	0.6116
Average	0.4463	0.4081	0.4165	0.4811	0.4380

Source: Bloomberg, processed.

Table 4. AG-DCC results

All Sample
	JKSE- KLSE	JKSE-STI	JKSE-SET	JKSE-PSEI	Average
Min	0.0903	0.1397	−0.4802	0.2075
Max	0.9622	0.9662	0.9323	0.9118
Average	0.4220	0.4486	0.4003	0.4899	0.4402
Pre-Crisis
Min	0.0903	0.1474	−0.4802	0.2070
Max	0.8341	0.9660	0.8361	0.7246
Average	0.4010	0.4363	0.3433	0.4787	0.4148
Crisis Period
Min	0.3162	0.1397	0.1794	0.3851
Max	0.9622	0.9650	0.9320	0.9118
Average	0.5328	0.4868	0.5125	0.5380	0.5175
Post Crisis
Min	0.1156	0.2479	−0.2476	0.3486
Max	0.9185	0.9484	0.8849	0.8226
Average	0.4221	0.4671	0.4384	0.4948	0.4556
ASEAN Economic Community (AEC)
Min	0.1361	0.1476	−0.0503	0.3150
Max	0.7571	0.6682	0.8020	0.5524
Average	0.4181	0.4306	0.4035	0.4852	0.4344

Source: Bloomberg, processed.

Table 5. Mean differences in DCC-GARCH

		z-stat	Sig (2-tailed)
JKSE- KLSE	Pre to Crisis	−7.717*	0
	Crisis to Post	−5.400*	0
	Post to Pre	−11.332*	0
	AEC to Pre	−11.306*	0
	AEC to Crisis	−7.604*	0
	AEC to Post	−4.564*	0
JKSE-STI	Pre to Crisis	−4.071*	0
	Crisis to Post	−5.224*	0
	Post to Pre	−10.170*	0
	AEC to Pre	−6.302*	0
	AEC to Crisis	−2.395**	0.017
	AEC to Post	−11.050*	0
JKSE-SET	Pre to Crisis	−5.146*	0
	Crisis to Post	−1.383	0.167
	Post to Pre	−9.268*	0
	AEC to Pre	−6.275*	0
	AEC to Crisis	−2.160**	0.031
	AEC to Post	−3.385*	0.001
JKSE-PSEi	Pre to Crisis	−7.370*	0
	Crisis to Post	−2.663*	0.008
	Post to Pre	−10.479*	0
	AEC to Pre	−6.182*	0
	AEC to Crisis	−4.149*	0
	AEC to Post	−4.528*	0

Source: Bloomberg, processed.

Note: It was tested with Wilcoxon Signed Rank, * Significance at 1%

**Significance at 5%

Table 6. Granger causality test

	F-Stat	Prob.		F-Stat	Prob.
KLSE → JKSE	2.1831	0.0540	PSEI → JKSE	2.5836**	0.0248
JKSE → KLSE	3.9802*	0.0014	JKSE → PSEI	4.2170*	0.0008
PSEI → JKSE	2.5836**	0.0248	STI → JKSE	7.3324*	0
JKSE → PSEI	4.2170*	0.0008	JKSE → STI	4.6005*	0.0004
PSEI → KLSE	1.4375	0.2081	SET → KLSE	2.0840	0.0651
KLSE → PSEI	1.9473	0.0841	KLSE → SET	1.3701	0.2330
STI → KLSE	4.0834*	0.0011	SET → PSEI	6.0879*	0
KLSE → STI	0.9413	0.4533	PSEI → SET	3.0059**	0.0106
STI → PSEI	7.8220*	0	STI → SET	3.4061*	0.0047
PSEI → STI	1.4690	0.1973	SET → STI	4.9713*	0.0002

Source: Bloomberg, processed.

* Significance at 1%

**Significance at 5%.

Lag length optimal was based on Akaike.

Table 7. Hedging effectiveness and diversification ratio

All Sample
	JKSE- KLSE	JKSE-STI	JKSE-SET	JKSE-PSEI	Average
Hedging Effectiveness (DCC)	0.4646	0.3443	0.2892	0.2835	0.3454
Hedging Effectiveness (AG-DCC)	0.4395	0.3589	0.2760	0.2964	0.3427
Diversification Ratio	1.1648	1.1366	1.1659	1.1505	1.1544
Pre-Crisis
Hedging Effectiveness (DCC)	0.5206	0.4215	0.3410	0.3522	0.4088
Hedging Effectiveness (AG-DCC)	0.5166	0.4524	0.2639	0.3791	0.4030
Diversification Ratio	1.2392	1.2088	1.2293	1.2164	1.2234
Crisis Period
Hedging Effectiveness (DCC)	0.3296	0.2793	0.2031	0.2419	0.2635
Hedging Effectiveness (AG-DCC)	0.5670	0.2469	0.2485	0.2282	0.3226
Diversification Ratio	1.0587	1.0823	1.0783	1.0860	1.0763
Post Crisis
Hedging Effectiveness (DCC)	0.5007	0.2932	0.2494	0.2572	0.3251
Hedging Effectiveness (AG-DCC)	0.5626	0.3166	0.3029	0.2701	0.3630
Diversification Ratio	1.1393	1.0946	1.1382	1.1239	1.1240
ASEAN Economic Community (AEC)
Hedging Effectiveness (DCC)	0.4955	0.3160	0.3922	0.1890	0.3482
Hedging Effectiveness (AG-DCC)	0.4452	0.3213	0.3839	0.3125	0.3657
Diversification Ratio	1.1388	1.1833	1.1569	1.1492	1.1570

Source: Bloomberg, processed

Figure 1. Time-varying correlation of DCC-GARCH—all sample.

Source: Bloomberg, processed.

Figure 2. Time-varying correlation of AG-DCC—all sample.

Source: Bloomberg, processed.

Figure 3. Volatility Spillovers.

Note: the y-axis is the spillover index, the x-axis is the year, and the calculation of volatility spillovers index was done using a 200-week rolling window, a VAR lag length of 5 and 10-day-ahead forecast errors horizon (H =10).Source: Bloomberg, processed.

Table 8. Spillover Connectedness

	JKSE	SET	STI	PSEI	KLSE	From Others	Net	Conclusion
JKSE (Indonesia)	96.4	2.3	1.3	0	0	3.6	89	Net-contributor
SET (Thailand)	21.3	77.1	1.4	0.1	0.1	22.9	6	Net-contributor
STI (Singapore)	24.8	12	63	0.2	0	37	−24	Net-recipient
PSEI (Philippines)	25.2	7.7	3.3	63.6	0.1	36.4	−35.5	Net-recipient
KLSE (Malaysia)	21.2	6.9	7	0.7	64.2	35.8	−35.6	Net-recipient
To Others	92.6	28.9	13	0.9	0.2			Total Spillover Index
Including Own	186	106.1	76	64.5	64.4			0.2710

Source: Bloomberg, processed.

Figure 4. Efficient Frontier.