Contagion effect of seasonality in the ASEAN plus 3 equity markets

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This study investigates the presence of contagion effect of seasonality in the ASEAN plus 3 markets. The study employs the month-end closing prices of each market's broad based stock indexes over the period of 20 years from January 1987 to December 2006. The analysis begins by establishing evidence of seasonality effect in sample markets. Using Granger causality approach, the study finds evidence of causal linkages with Hong Kong and Korea prevailing as leaders to the other ASEAN markets. The time-series regression analysis confirms that these markets, particularly Korea, have contagion effect on stock returns in Singapore and Malaysia. The study further investigates for the causal linkages due specifically to seasonality effect. Consistent with the results in the general market conditions, Korea remains the leader market in the ASEAN region as well as Hong Kong. Overall, the results lend strong support to the view that seasonality effect in some stock markets is contagious. Specifically, seasonality in Malaysia, Indonesia as well as Hong Kong can be significantly predicted by similar trends in Korea. However, in predicting seasonality in Singapore, the contagion effect from Malaysia and Indonesia are even more significant than that from Korea. From investment standpoint, the findings imply that investors in these affected (follower) markets should observe the trends in the leader markets in order to improve their chance to exploit the seasonality effect.

Original languageEnglish
Pages (from-to)111-134
Number of pages24
JournalJurnal Ekonomi Malaysia
Volume41
Publication statusPublished - 2007

Fingerprint

Contagion effect
Equity markets
Seasonality
Korea
Hong Kong
Malaysia
Linkage
Singapore
Indonesia
Regression analysis
Market conditions
Stock returns
Granger causality
Closing price
Stock index
Follower
Investors
Stock market

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)

Cite this

@article{9630fd0609084ce2b3809184f23bf37b,
title = "Contagion effect of seasonality in the ASEAN plus 3 equity markets",
abstract = "This study investigates the presence of contagion effect of seasonality in the ASEAN plus 3 markets. The study employs the month-end closing prices of each market's broad based stock indexes over the period of 20 years from January 1987 to December 2006. The analysis begins by establishing evidence of seasonality effect in sample markets. Using Granger causality approach, the study finds evidence of causal linkages with Hong Kong and Korea prevailing as leaders to the other ASEAN markets. The time-series regression analysis confirms that these markets, particularly Korea, have contagion effect on stock returns in Singapore and Malaysia. The study further investigates for the causal linkages due specifically to seasonality effect. Consistent with the results in the general market conditions, Korea remains the leader market in the ASEAN region as well as Hong Kong. Overall, the results lend strong support to the view that seasonality effect in some stock markets is contagious. Specifically, seasonality in Malaysia, Indonesia as well as Hong Kong can be significantly predicted by similar trends in Korea. However, in predicting seasonality in Singapore, the contagion effect from Malaysia and Indonesia are even more significant than that from Korea. From investment standpoint, the findings imply that investors in these affected (follower) markets should observe the trends in the leader markets in order to improve their chance to exploit the seasonality effect.",
author = "{Abdul Rahim}, Ruzita and {Md Nor}, {Abu Hassan Shaari}",
year = "2007",
language = "English",
volume = "41",
pages = "111--134",
journal = "Jurnal Ekonomi Malaysia",
issn = "0126-1962",
publisher = "Penerbit Universiti Kebangsaan Malaysia",

}

TY - JOUR

T1 - Contagion effect of seasonality in the ASEAN plus 3 equity markets

AU - Abdul Rahim, Ruzita

AU - Md Nor, Abu Hassan Shaari

PY - 2007

Y1 - 2007

N2 - This study investigates the presence of contagion effect of seasonality in the ASEAN plus 3 markets. The study employs the month-end closing prices of each market's broad based stock indexes over the period of 20 years from January 1987 to December 2006. The analysis begins by establishing evidence of seasonality effect in sample markets. Using Granger causality approach, the study finds evidence of causal linkages with Hong Kong and Korea prevailing as leaders to the other ASEAN markets. The time-series regression analysis confirms that these markets, particularly Korea, have contagion effect on stock returns in Singapore and Malaysia. The study further investigates for the causal linkages due specifically to seasonality effect. Consistent with the results in the general market conditions, Korea remains the leader market in the ASEAN region as well as Hong Kong. Overall, the results lend strong support to the view that seasonality effect in some stock markets is contagious. Specifically, seasonality in Malaysia, Indonesia as well as Hong Kong can be significantly predicted by similar trends in Korea. However, in predicting seasonality in Singapore, the contagion effect from Malaysia and Indonesia are even more significant than that from Korea. From investment standpoint, the findings imply that investors in these affected (follower) markets should observe the trends in the leader markets in order to improve their chance to exploit the seasonality effect.

AB - This study investigates the presence of contagion effect of seasonality in the ASEAN plus 3 markets. The study employs the month-end closing prices of each market's broad based stock indexes over the period of 20 years from January 1987 to December 2006. The analysis begins by establishing evidence of seasonality effect in sample markets. Using Granger causality approach, the study finds evidence of causal linkages with Hong Kong and Korea prevailing as leaders to the other ASEAN markets. The time-series regression analysis confirms that these markets, particularly Korea, have contagion effect on stock returns in Singapore and Malaysia. The study further investigates for the causal linkages due specifically to seasonality effect. Consistent with the results in the general market conditions, Korea remains the leader market in the ASEAN region as well as Hong Kong. Overall, the results lend strong support to the view that seasonality effect in some stock markets is contagious. Specifically, seasonality in Malaysia, Indonesia as well as Hong Kong can be significantly predicted by similar trends in Korea. However, in predicting seasonality in Singapore, the contagion effect from Malaysia and Indonesia are even more significant than that from Korea. From investment standpoint, the findings imply that investors in these affected (follower) markets should observe the trends in the leader markets in order to improve their chance to exploit the seasonality effect.

UR - http://www.scopus.com/inward/record.url?scp=55449111840&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=55449111840&partnerID=8YFLogxK

M3 - Article

VL - 41

SP - 111

EP - 134

JO - Jurnal Ekonomi Malaysia

JF - Jurnal Ekonomi Malaysia

SN - 0126-1962

ER -