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The concept of regional economic integration is attracted by people''s attention. In order to prompt economic growth, East-Asia Countries look forward to financing capitals from international financial market. Therefore, they drive foreign capital to invest in their country. The constraint of foreign exchange is relaxed and they expect to stimulate their financial market growth. In the same time, international speculative capitals go to domestic financial market. Because large capital is rotating between nations. if one of them has economic fluctuation, speculative bcapital will be hedged. In this South-East Asia Financial Crisis, capital rotating among nations led every foreign exchange market to be fluctuated. This research studies about the stock price index relationship among nations, and incorporate the foreign exchange rate factor to be considered. This study tries to test stock market and foreign exchange market whether they meet weak-formmarkets and detect their long-run equilibrium relationships and short-termadjustment process. Can stock market in East-Asia area be viewed as an integrated market since their internation al trade are frequent? The summary of this study can provide information for international investors when they want to invest in East-Asia area and for government to make financial decision-policy. This thesis employs the unit root cointegration and error correction mo del to examine the stock prices and foreign exchange prices. The main East-Asia countries include Thailand, Philippines, Malaysia, Singapore, Taiwan, Hong-Kong, Japan and Korea. Daily closing price of stock market index and foreign exchange rate were collected as samples from Mar. 1 1996 to Mar. 31 1998. The empirical results can be summarized as follows:1. Each of stock index series and foreign exchange series are non-stationary. This implies each markets satisfy the weak-form efficiency hypothesis.2. There is one cointegration vector in stock markets of East-Asia countries while there are three cointegration vectors in foreign exchange markets. 3. When foreign exchange factor is to be considered, the cointegration among stock markets of East-Asia countries is more significant.4. In addition, stock price and exchange rate are to be considered together, the effe cts of cointegration are more significant in international countries than in only one country
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