ISEAS - Yusof Ishak Institute ASEAN Economic Bulletin

An Examination of ASEAN Stock Markets: A Cointegration Approach
Author(s): Evanor D. Palac-McMiken

Source: ASEAN Economic Bulletin, Vol. 13, No. 3 (MARCH 1997), pp. 299-311
Published by: ISEAS - Yusof Ishak Institute
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ASEAN Economic Bulletin Vol. 13, No. 3
An Examination of
ASEAN Stock Markets
A Cointegration Approach
Evanor D. Palac-McMiken
Using cointegration analysis, this study tests whether ASEAN stock markets are collectively
efficient. It is argued that if the asset (stock) markets are collectively efficient in the long
run, these asset (stock) prices are not cointegrated, that is have no long run relationship. On
the other hand, the presence of cointegration provides evidence of an interdependent
relationship. The results suggest that with the exception of Indonesia all the markets are
linked with each other. Thus, during the period. 1987-95 these markets were not collectively
efficient. From an investor's point of view, however, these results would suggest that despite
evidence of interdependence aming the ASEAN stock markdets, there is still scope for
efficient portfolio diversification across these markets.
1. Introduction portfolio diversification lowers risk without sacri

International money and capital markets have be ficing expected returns (Aburachis 1993, p. 32).
come increasingly integrated in recent years. The
One common measure of stock market
removal of restrictions on capital flows, the comovements is the correlation analysis. This
growth of the Eurocurrency markets, the shift to method of analysis is fraught with problems
floating exchange, improved communication sys because it does not eliminate spurious relation
tems, and the development of new instruments ships. In recent years, unit root testing and
and techniques have all contributed to the integra cointegration analysis have been applied to stock
markets. Various studies have been undertaken to
tion process (Hultman and McGee 1993, p. 126).
As O'Brien (1992) points out, deregulation and examine the integration of international stock
liberalization has clearly encouraged globalization markets using more recent data and employing
and integration because liberal markets and sys these advanced techniques in a large number of
tems tend to be open, providing greater ease of markets. However, there have been no studies as
access, and greater transparency of pricing and yet examining equity markets integration of the
information. Globalization has proceeded most member states of the Association of Southeast
rapidly in equity markets. The driving force in Asian Nations (ASEAN).
these markets has been the fact that international In this study the following examination is
ASEAN Economic Bulletin 299 March 1997
undertaken: First, the study empirically examines ASEAN stock market in the light of reforms
the weak form efficiency hypothesis of stock undertaken by these countries to encourage the
prices in each of the five ASEAN stock markets development of these markets. Section 3 discusses
using unit roots tests. Second, it tests whether the methodology and data. Empirical results are
these stock markets are collectively efficient. In presented in Section 4. The study ends with a
particular, the joint efficiency of two markets is summary and conclusions of the research.
examined by cointegration tests. According to the
emerging cointegration literature, if the asset 2. The ASEAN Stock Markets
(stock) markets are collectively efficient in the
long run, these asset (stock) prices are not A stock market is part and parcel of a capital
cointegrated (Cahn and Lai 1993; Granger 1986; market, which typically transacts all public and
McDonald and Taylor 1989; Coleman 1990), that private debt instruments with maturities exceed
is have no long run relationship. The presence of ing one year. Stock markets usually include
cointegration, on the other hand, provides corporate stock and shares for which there are no
evidence of an interdependent relationship. fixed maturity. More recently, some stock markets
The results of this study can address some also include commodity futures. The main
important issues. purpose of a capital market in a country is to
First, the results will have implications for assist the process of economic development by
regional financial stability. There is broad agree mobilizing medium- and long-term funds from a
ment that internationally-integrated capital wide cross-section of the population to finance
markets reduce the scope for independent public development programmes, fund private
monetary policy (Logue, Salant and Sweeney investment, as well as assist the banking system
1976). If markets are highly integrated, this in securitizing their assets. In addition, capital
implies that a given country's economy cannot be markets promote private enterprise by providing
effectively insulated from foreign influences. If intermediary services to raise funds for corporate
ASEAN countries insist on pursuing independent investment and expansion. Capital markets can
monetary policies in the environment of an inte also be used as a channel through which the
grated capital market, their moves may have ownership structure of companies are changed. An
destabilizing effects on the region. Thus, increas effective capital market is essential for the
ing capital market integration in the ASEAN financial development of any developing country
region may as a consequence force ASEAN (Lin 1992, p. 64).
policymakers to harmonize monetary policies. The development of the equity markets in
Second, these outcomes have important impli ASEAN is in line with the financial reforms that
cations for international diversification of these countries have been undertaking since the
securities portfolios. Effective diversification of last decade. These reforms sought to improve
portfolios among international stock markets their ability to mobilize resources domestically
cannot be achieved if these markets are through the development of both banking and
cointegrated. If ASEAN markets are cointegrated, non-banking components of their financial mar
for investors who wish to diversify their portfolio kets. They are also aimed at improving access to
it should not matter whether they mix their port global financial markets by liberalizing their
folio with Indonesian or Filipino stocks because if external capital accounts to allow for freer
Indonesian stock prices decline steadily over a capital flows. It is expected that the reforms will
long period of time, then stock prices in the consequently reduce the costs of financial inter
Philippines will follow the same decline closely mediation through greater competition in the
(because the two markets are cointegrated). financial sector, elimination of institutional
There are four sections in this study. Following barriers and equal fiscal treatment of financial
the introduction is a discussion of the growth of instruments. An important component of the
TABLE 1
Growth of ASEAN Stock Markets
Market Capitalization Market Capitalization

Number of Listed
(US$ millions) Companies as%ofGNP
1984 1994 1984 1994 1984 1994
Indonesia 85 47,241 24 216 0.10 28

Malaysia 19,401 199,276 217 478 61.29 296
Thailand 1,720 131,479 96 389 4.16 91
Philippines 834 55,519 149 189 2.73 84
Singapore 12,247 181,646 121 275 64.01 219
SOURCES: Emerging Stock Market Factbook (Washington, DC: International Finance Corporation); Sin
Monthly Statistical Bulletin, various issues.
TABLE 2
Comparison of ASEAN Stock Market Risks and Returns
(Percentages)
7987 1988 1989 1990 1991 1992 1993 1994 1995
Indonesia
Investment returns 16.5 167.3 34.2 7.1 -45.7 12.9 74.6 -15.3 10.3
Volatility 1.48 30.75 10.72 10.56 6.33 4.88 4.06 7.52 6.60
Malaysia
Investment returns 1.9 36.2 44.7 -7.2 11.5 16.3 74.4 -23.3 22.1
Volatility 12.7 5.0 3.4 6.8 5.2 3.1 8.4 8.1 18.5
Philippines
Volatility 19.6 6.5 7.5 9.1 10.1 7.3 6.3 6.3 6.4
Singapore
Investment returns -7.7 16.3 28.8 -13.6 22.7 -1.9 45.7 -13.1 -0.9
Volatility 9.5 25.1 2.7 7.4 4.9 3.3 3.8 3.5 2.4
Thailand
Volatility 10.9 6.9 4.4 10.6 8.4 5.9 8.4 12.9 5.9
a span
reforms also calls for the strengthening of ten years, Indonesian stock market
of the
regulatory environment to ensure the capitalization
smooth grew from 85 million to over 47 bil
functioning of the system (Tarumizu lion1992,
dollars. While in 1984 the Indonesian stock
pp. 38-39). market capitalization only accounted for a mere
Table 1 shows the tremendous growth ASEAN 0.1 per cent of GNP, in 1994 it accounted for
stock markets have experienced in recent years. In close to 30 per cent of GNP.
FIGURE 1
ASEAN Stock Market Risks and Returns for 103 Months from January 1987 to July 1995
Indonesia
_*_
PhiHppines
Thailand
*
?*
Singapore Malaysia
_*_
0.00
50.00 100.00 150.00 200.00 250.00 300.00
Returns
Table 2 presents stock returns (based on capital Philippines and Thailand, is estimated to be less
weighted price indexes) and volatilities for the than 1 per cent of the population compared with
five ASEAN countries from 1987 to 1995. The around 10 per cent in developed countries. The
accumulated returns for 103 months (January stock markets in these four ASEAN countries are
1987-July 1995) and accompanying risk also among the 32 "emerging stock markets"
(volatilities) are shown in Figure 1. As expected, throughout the developing world, out of the ten
there is an inverse relationship between risk and coming from Asia. The capitalization of these 10
returns. While the Singapore market offers the Asian markets accounts for close to four-fifths of
lowest returns, it also has the lowest risk. The the total capitalization of the 32 emerging markets
Indonesian market on the other hand, offers the despite the fact that these Asian markets only
highest return, but the risks are also significantly comprise slightly over 4 per cent of the world's
high compared to other markets. The interesting stock market capitalization in 1989 (Tarumizu
case is the Philippines and Thailand. Figure 1 1992, pp. 38-39).
indicates that the returns from both markets are
very similar, but the Philippines is certainly more
3. Data and Methodology
risky, at least during the period being studied here.
Thus, between these two markets, the optimal 3.1 Data
choice for an investor seems to be perfectly clear.
Despite the rapid growth of the ASEAN stock Capitalization-weighted monthly price indexes
markets, their enormous potential for mobilizing from Indonesia (JCSPI), Malaysia (KLSE
resources has not been fully tapped. According to Composite) Philippines (PSE Composite),
Tarumizu (1992), the number of individuals who Singapore (SES-A11) and Thailand (SET) are used
invest in the stock market in many developing in this study. The data were taken from the World
member countries (DMCs) of the Asian Develop Stock Exchange Fact Book published by Elec
ment Bank, which include Indonesia, Malaysia, tronic Commerce, Inc. (ECI). PSE-Composite
FIGURES 2.1 and 2.2
Monthly Stock Price Indexes, January 1987-October 1995
Philippines: PSE-Composite
3,500.0
500.0
0.0
Jan Aug Mar Oct May Dec July Feb Sept April Nov June Jan Aug Mar Oct
87 87 88 88 89 89 90 91 91 92 92 93 94 94 95 95
Thailand: SET
1,600.0
1,400.0
1,200.0
0.0
87 87 88 88 89 89 90 91 91 92 92 93 94 94 95 95
FIGURES 2.3 and 2.4
Singapore: SES-A11
87 87 88 88 89 89 90 91 91 92 92 93 94 94 95 95
Malaysia: K.L.-Composite
1,400.0
400.0
87 87 88 88 89 89 90 91 91 92 92 93 94 94 95 95
FIGURE 2.5
700.0
100.0 H
87 87 88 88 89 89 90 91 91 92 92 93 94 94 95 95
consists of 30 stocks computed using the of Paasche

lags required to achieve white noise errors, et
formula with daily chaining. SES-A11 and areKLSE
error terms that that could be ARMA proc
Composite are computed using the Laspeyres esses with time dependent variances. The null
hypothesis is that the ASEAN stock market in
formula, with the former consisting of all ordinary
shares and the latter of 100 stocks. SET
dexes and
have a unit root against the alternative that
JCSPI involves all listed stocks computed
they doby
not, that is:
Paasche formula. The data series for each ASEAN
country covered in this study are presented
Ho: in
a=1
Figures 2.1 to 2.5. H?:
a a* 1.
3.2 Unit Root Tests
Tests for unit roots are perfo
Two regression models (model with bothmented
trend Dickey-Fuller (ADF)
and drift and model with drift) are used to test for
hypothesis of stock prices in an
unit roots. These are:
having unit roots is not reject
k
changes in the stock prices o
xt = Y+8t + axt_1+
j=i XGjAx et random. Thus, this would sugge
(with trend and drift) is weak form efficient.
k
xt = y + axt l + ?0 Axt . + et (with drift) 3.3 Cointegration and

j=i the Error Correction Model
where xt is any stock market (price) index; y is The cointegration of time seri
the drift, 8 is the trend, k is the minimum number for the analysis of time se
Granger (1983), Granger and Weiss (1983) and about the long-run relationship and the nature of
Engle and Granger (1987). In general terms, two the adjustment process among national stock
or more time series is said to be cointegrated if a markets.
linear combination of them is stationary, or The error correction analysis is also fundamen
has roots outside the unit circle even though tal for testing the crossborder market efficiency
individually each are non-stationary. Lack of hypothesis since it describes the long-run dynamic
cointegration, on the other hand, suggests that the adjustment process between two stock exchange
variables have no-long run link and thus can drift markets (Arshanapalli and Doukas 1993). The
away from each other arbitrarily. Since cointegra logic behind the error-correction equations is
tion implies that non-stationary time series such that if stock markets in i and j are cointegrated,
as stock prices can move stochastically together stock prices changes in market i are predictable
towards some long-run stable relationship, the by [x| - ocxj]. If stock prices in markets i and j
existence of cointegrating relationships among are determined independently, then stock market
various stock prices has a direct implication in prices in market i should have incorporated all the
terms of the common trends amongst these series historical information. Thus, in explaining
(Corhay, et al. 1995), which would in turn suggest changes in stock prices in market i no other infor
interdependence in these markets. mation could be more useful apart from the
To illustrate the concept of cointegration in this history of stock prices in that market itself. As
study, let xj be the stock price index series of Granger (1986) and MacDonald and Taylor
(1989) have demonstrated, asset prices from two
country i and x j be the stock price index series of
country j. If xj and xj are cointegrated then efficient markets cannot be cointegrated. Thus,
according to the Granger representation theorem when markets are linked with each other (that is
(Granger 1969; Engle and Granger 1987), there cointegrating) it implies inefficiency.
must exist an error correction representation of
the following form: 3.4 Test for Cointegration
There are three steps involved in testing for
x; - xU = ao+ ?izt-i+ Bi(L)(x; - xU)+ cointegration. First is to determine the order of in
tegration in each of the series which in this study
B2(L)(xj-xj_1)+elt is done through the augmented Dickey-Fuller unit
root analysis. The second step is estimating the
xi- xLi = ?2 + a3zt-i + B3(L)(x; - xU)+ following "cointegrating regression" by ordinary
B4(L)(xj-x;_1)+e2t least squares.
where B^L), B2(L), B3(L) and B4(l) are poly xj = c + d xj + zt

nomials, L is the lagged operator, e{ and e2 are the
white noise error terms and ztl is the lagged value where xj and xj are the national stock market
of the error term from the following cointegration, price series indexes being tested for cointegration.
or equilibrium regression: For the third step, cointegrating residuals, zts,
are recovered and the ADF test is conducted by
xj = c + d xj + zt running the following equation to test for
The error correction model has the standard stationarity of the zts.
interpretation: the change in xj is due to the
immediate short-run effect from the change in Dzt = -6zt-l+ p=l?p Dz +vt
xj and to last period's error term, z , which
represents the long-run adjustment to past In testing for cointegration, the null hypothesis
disequilibrium. Hence, estimation of the error cor is that there is no cointegration among stock
rection equations is expected to provide evidence prices against the alternative of cointegration.
4. Empirical Results In both models, the null hypotheses of unit
4.1 Unit Root Tests roots in the first differences of the stock price
indexes are rejected in all of the markets at the 1
Before testing for cointegration, the order of inte per cent level with the exception of Malaysia. The
gration of the ASEAN stock markets indexes is presence of unit root in the first differences of
determined. Tests for unit roots are performed Malaysian stock series is only rejected in Model 2
using the augmented Dickey-Fuller tests. The null at 5 per cent. These results suggest that changes
hypothesis is that the stock indexes have a unit in ASEAN stock prices (i.e. stock returns) are
root, against the alternative that they do not. The stationary while stock prices are 1(1), implying
results are presented in Table 3 for the two that the stock price level of the ith market at t is
models. The estimated unit root parameters (as) solely dependent on the stock prices at t-1, plus
are close to 1 with the exception of Malaysia in an error term. The results suggest that ASEAN
Model 1. The reported results indicate the markets are weak form efficient satisfying the first
presence of a unit root in the levels of all the condition for cointegration.
indexes (that is the null hypothesis of unit root
cannot be rejected).
TABLE 3
Unit Root Tests of Monthly Stock Price Indexes, January 1987 - July 1995
Countries Model 1 Model 2
a ADFa ADF a ADFa ADF

levels differences levels differences
Singapore 0.85 -3.196 -4.673** 0.98 -0.700 -4.654**

(7) (6)b
Indonesia 0.94 -2.090 -5.249** 0.96 -1.885 -5.246**
(3) (2)
Malaysia 0.77 -2.924 -3.017 0.97 -1.182 -3.094*
(10) (10)
Philippines 0.94 -1.747 -5.701** 0.99 -0.329 -5.681**
(3) (2)
Thailand 0.87 -1.938 -5.304** 0.98 -0.798 -5.304**
(7) (6)
Notes
a. ADF denotes the augmented Dickey-Fuller test. The test is based on the following regression:
k
Model 1 xt = y + St + ocxt + ?6 Axt + et (with trend and drift)

j=i J J
k
Model 2 x = y + ax + ?6. Ax . + e (with drift)

j=i J J
b. The number in parentheses denotes the minimum value of k required to achieve white noise errors. Th
numbers are the same in both models.
* and ** indicates statistical significance at the 5 per cent and 1 per cent level, respectively. Critical values fo
N=100, are -3.45 (5 per cent) and -4.04 (1 per cent) for model 1; and -2.89 (5 per cent), -3.51 (1 per cent) f
model 2 as reported in Fuller (1976).
4.2 Cointegration Tests much more risky market when compared to these
other two markets. As shown in Figure 1,
The augmented Dickey-Fuller (ADF)
although the differential returns between the
cointegration test results are presented in Table 4.
Philippine and Thai markets are very small, the
Of the ten possible cointegrating relationships
difference in the level of risk is significantly
among the five ASEAN countries covered in this
higher for the Philippines. Thus, investors in
study, the null hypothesis of no cointegration is
Malaysia and Singapore may consider higher risk
rejected in four cases. Three observations can be
for higher expected returns in the Thai market but
made from the results. First, despite the fact that
would consider the level of risk in the Philippines
the Singapore and the Malaysian markets were
as beyond their reservation level of acceptable
separated and became independent entities in risk.
1973, the stock prices in these two markets are
Third, the Indonesian market does not appear
linked. One obvious explanation for this is the
linked with any of the other ASEAN markets.
fact that stocks listed in one exchange were auto
Although all the ASEAN stock markets have
matically listed on the other. It was not only until
shown tremendous growth, the growth in the
1990 that Malaysian stocks were finally delisted
Indonesian market was just phenomenal. This
from the Singapore Stock Exchange. With the
growth can be predominantly attributed to the
delisting of Malaysian stocks from the Singapore
dramatic policy reforms that the government has
market, however, the CLOB market was estab
instituted to develop its financial sector in the last
lished to act as a venue through which Singapore
decade. For example, the December 1987 reform
investors can continue to transact in Malaysian
package included the following: simplification of
shares delisted from SES. Although this market is
procedures for issuing and listing securities on the
envisioned to eventually transact in shares of
Jakarta Stock Exchange, the removal of the prohi
companies from other Asian NIEs and other
bition on foreign investors purchasing shares in
ASEAN countries, as of March 1990 of the 144
publicly-listed companies, the introduction of
shares listed in this market 131 are Malaysian
bearer securities (possession of these certificates
companies.
is the sole proof of ownership), increase in the
The second more interesting result is the pres
scope of new companies with no profit history to
ence of cointegration between Thailand's stock
market and all the other ASEAN markets with the raise capital on the Parallel Stock Exchange; and
removal of the previously imposed 4 per cent
exception of Indonesia. Thailand, therefore, can
limit on daily price fluctuations in the secondary
be taken as representative of the ASEAN market
as it is the market found to be most interactive market (Noerhadi 1994, p. 205). Thus, the lack of
interaction between the Indonesian market with
with all the other markets. One likely explanation
the rest of the ASEAN market may be explained
for this may be found in the magnitude and source
by the fact that the market was responding to the
of foreign investment in these countries. Japanese
changes in the local scenario and that these
and Hong Kong investment in Thailand and the
changes were of no consequence to the other
Philippines account for almost 40 per cent of total ASEAN markets. One may also add that the
foreign investment and 30 per cent in Singapore mechanics of operation (say in terms of scripless
and Malaysia. The cointegrating relationship may trading, clearing and settlement) in the Indonesian
indicate that Japanese and Hong Kong investors market has not yet reached a level of maturation
are variant to policy differentials and changes in which would make interaction with other markets
local conditions between Thailand and these three a natural process.
other ASEAN countries. On other hand, the The results of the cointegration test suggest that
absence of interdependence between Malaysia and ASEAN stock markets have some degree of inter
the Philippines as well as the Philippines and dependence in stock prices, with the Thai market
Singapore may be because the Philippines is a providing the link in this interdependence. The
TABLE 4
Cointegrating Regressions, January 1987-July 1995
Dependent variables Constant Trend Log-likelihood Coefficient ADF

Singapore-Indonesia
SNG 245.27 2.06 -414.05 0.858 -3.11(6)
IND -76.51 1.32 -489.53 0.945 -1.93(3)
Singapore-Malaysia
SNG 180.23 -0.51 -442.35 0.447 -4.36(4)*
MAL -295.48 2.66 -526.88 0.406 -4.19(4)*
Singapore-Philippines
SNG 243.25 0.71 -390.78 0.834 -2.86(6)
PHI -1238.47 7.01 -597.90 0.938 -1.57(3)
Singapore-Thailand
SNG 215.90 0.09 -445.29 0.824 -3.17(2)
THA -326.98 5.47 -568.34 0.718 -3.89(3)*
Malaysia-Indonesia
MAL 169.21 6.52 -551.00 0.818 -2.75(4)
IND 71.06 0.71 -510.76 0.933 -2.07(2)
Malaysia-Philippines
MAL 157.50 2.92 -523.43 0.727 -3.06(3)
PHI -364.51 -0.49 -632.37 0.871 -1.93(3)
Malaysia-Thailand
MAL 93.82 1.79 -542.72 0.761 -2.91(3)
THA 4.44 2.99 -579.72 0.714 -3.72(2)*
Philippines-Indonesia
PHI 254.84 21.72 -611.98 0.945 -1.76(3)
IND 147.69 3.46 -478.88 0.942 -2.09(3)
Philippines-Thailand
PHI -55.74 6.26 -626.87 0.934 -1.66(2)
THA 169.77 6.53 -559.322 0.773 -3.45(3)*
Thailand-Indonesia
THA 101.33 7.90 -569.85 0.739 -3.14(4)
IND 33.05 -2.09 -533.11 0.865 -2.63(2)
* indicates statistical significance at the 5 per cent level. Critical value of the DF statistic at 5 per cent fo
-3.45 and -4.04.
Cointegration equation errors are used to perform the ADF non-stationarity tests based on the follo
sion:
Dz, = -ez,_,+ p=l

IPpDz +v,
where Dzt is the change in the error term from the cointegration equation and vt is a random error. If 0 is negative
and significantly different from zero, the z residuals from the equilibrium equation are stationary so the hypothesis
of cointegration is "accepted".
absence of a link, however, between the Indone 1987-95 these markets were not collectively
sian market and any other ASEAN market still efficient. Stock price movements in Singapore can
provides room for efficient portfolio diversifica be predicted using stock prices in Malaysia and
tion even at the regional level. vice-versa. On the other hand, Thai stock prices
can be used to predict stock price movements in
6. Summary and Conclusions Singapore, Malaysia and the Philippines.
From an investor's point of view, these results
The stock prices of five ASEAN markets were
suggest that despite evidence of interdependence
examined using the unit root and cointegration
tests. The results of the unit root testing suggest
among the ASEAN stock markets, there is still
that there exist unit root in stock prices while the scope for efficient portfolio diversification across
these markets.
unit roots in the first difference are all rejected at
1 per cent level. These results provide evidence Although this study may have found evidence
that ASEAN stock markets are weak form that ASEAN markets are linked, and have
efficient. raised some likely explanations for this linkage,
The results of the cointegration test suggest that further research is necessary to establish the
with the exception of Indonesia all the markets are statistical significance of these likely sources of
linked with each other. Thus, during the period interdependence.
NOTE
I would like to acknowledge constructive comments from the participants of the 1996 International Conference on
the Asia-Pacific Economy held in Cairns, Australia. I also like to thank Mohammed Nishat for helpful discussions
and Rainier Wolcke for sourcing of data. Research support from ISEAS and the Auckland Business School is also
gratefully acknowledged.
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Evanor D. Palac-McMiken is Lecturer in the Department of Economics, the University of Auckland, New Zealand.

ISEAS - Yusof Ishak Institute ASEAN Economic Bulletin

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An Examination of ASEAN Stock Markets: A Cointegration Approach

Author(s): Evanor D. Palac-McMiken

1. Introduction portfolio diversification lowers risk without sacri

ASEAN Economic Bulletin 299 March 1997

ASEAN Economic Bulletin 300 March 1997

Market Capitalization Market Capitalization

Indonesia 85 47,241 24 216 0.10 28

7987 1988 1989 1990 1991 1992 1993 1994 1995

ASEAN Economic Bulletin 301 March 1997

ASEAN Economic Bulletin 302 March 1997

ASEAN Economic Bulletin 303 March 1997

ASEAN Economic Bulletin 304 March 1997

consists of 30 stocks computed using the of Paasche

xt = y + axt l + ?0 Axt . + et (with drift) 3.3 Cointegration and

ASEAN Economic Bulletin 305 March 1997

where B^L), B2(L), B3(L) and B4(l) are poly xj = c + d xj + zt

ASEAN Economic Bulletin 306 March 1997

Countries Model 1 Model 2

a ADFa ADF a ADFa ADF

Singapore 0.85 -3.196 -4.673** 0.98 -0.700 -4.654**

Model 1 xt = y + St + ocxt + ?6 Axt + et (with trend and drift)

Model 2 x = y + ax + ?6. Ax . + e (with drift)

ASEAN Economic Bulletin 307 March 1997

ASEAN Economic Bulletin 308 March 1997

Dependent variables Constant Trend Log-likelihood Coefficient ADF

Dz, = -ez,_,+ p=l

ASEAN Economic Bulletin 309 March 1997

ASEAN Economic Bulletin 310 March 1997

ASEAN Economic Bulletin 311 March 1997

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Singapore 0.85 -3.196 -4.673 0.98 -0.700 -4.654