Stock Market Linkages in the ASEAN-5 Region and Implications on Seasonality Effect

Abstract

Abstract: This study investigated stock market linkages in the ASEAN region and consequently their implications on seasonality. For the period of 1988-2005, this study established evidence of seasonality effect in the selected stock markets. The Granger causality tests suggest causal linkages with Singapore leads in the majority of cases. The time-series regression analysis detects contagion effect whereby stock returns in Singapore set the trend for Malaysia, Thailand and Indonesia. Further investigation on causal linkages due specifically to seasonality effect produced results that lend strong support to the view that seasonality effects in some stock markets are contagious. Specifically, seasonality effect in the Malaysian stock market is preceded by seasonality effect in Singapore and Thailand, which in turn is preceded by that in Indonesia and the Philippines, respectively. These findings imply that investors in such markets could elevate their ability to exploit seasonality effect by observing similar trends in the leader markets.