Ming-Shiun Pan

International stock market efficiency and integration: A study of eighteen nations

This study examines the relationships among stock prices in eighteen national stock markets by using unit root and cointegration tests for the period 1961--92. All the markets were analyzed individually and collectively in regions to test for market efficiency. The results from unit root tests suggest that the world equity markets are weak-form efficient. The cointegration test results show that there are only a small number of significant cointegrating vectors over the last three decades. However, the number of significant cointegrating vectors increases after the October 1987 stock market crash, a result that is consistent with the contagion effect. Copyright Blackwell Publishers Ltd 1997.

Mean and Volatility Spillover Effects in the U.S. and Pacific-Basin Stock Markets*

This paper investigates the mean return and volatility spillover effects from the U.S. and Japan to four Asian stock markets, including Hong Kong, Singapore, Taiwan, and Thailand. The empirical results from examining the data for the period of 1984 to 1991 suggest that the U.S. market is more influential than the Japanese market in transmitting returns and volatilities to the four Asian markets. In addition, the observed spillover effects are unstable over time in the sense that the spillovers increase substantially after the October 1987 stock market crash. Furthermore, the evidence indicates that while the cross–country stock investing hypothesis cannot by itself explain the international transmissions of return and volatility, the market contagion also plays an important role in the transmission mechanism.

Common stochastic trends and volatility in Asian-Pacific equity markets

Abstract This paper uses Johansens cointegration test and a modified cointegration test with generalized autoregressive conditional heteroskedasticity (GARCH) effects to examine linkages between the U.S. and five Asian-Pacific stock markets (Australia, Hong Kong, Japan, Malaysia, and Singapore) during the period from 1988 to 1994. The modified cointegration test with GARCH effects is used to assess whether these stock price series share common time-varying volatility. The results indicate that the six stock markets are highly integrated through the second moments of stock returns but not the first moments.

International transmission of stock price movements: Evidence from the U.S. and five Asian-Pacific markets

Using a vector autoregressive analysis, this paper examines the structure of international transmissions in daily returns for six national stock markets— the U.S., Japan, Hong Kong, Singapore, Taiwan, and Thailand. Our results generally indicate that (1) the degree of interdependence among national stock markets has increased substantially after the 1987 stock market crash, (2) the U.S. market plays a dominant role of influencing the Pacific-Basin markets, (3) Japan and Singapore together have a significant persistent impact on the other Asian markets, and (4) the markets in Taiwan and Thailand are not efficient in processing international news.

On market efficiency of Asian foreign exchange rates: evidence from a joint variance ratio test and technical trading rules

Abstract This study employs a joint variance ratio test and technical trading rules to examine the random walk behavior for nine Asian foreign exchange rates for the period 1988–1995. The joint variance ratio test results suggest that there is little evidence of serial correlations in the daily exchange rate series. The results also indicate that, in general, the moving average and channel trading rules do not generate significant, positive profits.

Do currency futures prices follow random walks

Abstract This paper examines the random walk process for four currency futures prices for the period 1977–1987 by using the variance ratio test. The random walk hypothesis is tested through asymptotic standardized statistics as well as by computing the significance level based on the bootstrap method. Both long time-series prices and individual contract prices for four currency futures, the British pound, the German mark, the Japanese yen, and the Swiss franc are analyzed. The results provide little evidence against the random walk null hypothesis, though non-randomness is documented in the Japanese yen. Additionally, the currency futures markets apparently become more efficient as markets mature over time.

Transmission of Stock Returns and Volatility between the U.S. and Japan: Evidence from the Stock Index Futures Markets

In this paper, we examine the nature of transmission of stock returns and volatility between the U.S. and Japanese stock markets using futures prices on the S&P 500 and Nikkei 225 stock indexes. We use stock index futures prices to mitigate the stale quote problem found in the spot index prices and to obtain more robust results. By employing a two-step GARCH approach, we find that there are unidirectional contemporaneous return and volatility spillovers from the U.S. to Japan. Furthermore, the U.S.s influence on Japan in returns is approximately four times as large as the other way around. Finally, our results show no significant lagged spillover effects in both returns and volatility from the Osaka market to the Chicago market, while a significant lagged volatility spillover is observed from the U.S. to Japan.

Market efficiency and cointegration: Some evidence in Pacific-Basin black exchange markets

This paper investigates the efficiency of the black exchange markets in Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand. The study applies unit root and cointegration tests to examine black exchange market efficiency of Pacific-Basin countries. The generating process of black exchange rates appears to be a random walk. This is consistent with Gupta (1981) and other foreign exchange rate unit root test studies. Johansen cointegration tests are performed for these black exchange markets together with Japan and Singapore. The results suggest that there is at least one unit root among the black market exchange rates. Hence, black exchange markets are not collectively efficient.

International momentum effects: a reappraisal of empirical evidence

This article examines profits from momentum strategies when applied to national stock market indexes. The empirical results based on the stock market indexes of 12 European countries and the United States show significant momentum profits. However, our analysis also suggests that the international momentum effect may simply be an empirical illusion due to the use of overlapping data. Specifically, the international momentum effect disappears when the analysis is conducted on nonoverlapping data. Our analysis shows that the international momentum effect, if exists, is mainly driven by national stock market indexes’ return autocovariances. However, we find no or little evidence of significant serial correlations in returns for each of the stock market indexes, thereby leading further support to the finding that international momentum effects may not exist.

Fractional cointegration, long memory, and exchange rate dynamics

Abstract In this article, we examine empirically whether fractional cointegration exists in the system of seven exchange rates and this form of cointegration is associated with long memory. The results indicate that fractional cointegration in exchange rates is a feature for only the 1980–1984 sample, not for the entire post-1973 float, the subperiod before 1980, and the sample after 1984. The results show a significant long memory, mean-reverting behavior in equilibrium errors for the subperiod 1980–1984. The results also suggest that the exchange rates are cointegrated in the usual way for the 1985–1992 sample data. The current findings suggest a conjecture that the fractional cointegration feature of exchange rates, if exists, could be changing across varying time spans.