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Asia’s Stock Markets: Are There Crouching Tigers and Hidden Dragons?
Author:
Mr. Fabian Lipinsky
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and
Ms. Li L Ong
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Series:
IMF Working Papers
Volume/Issue:
Volume 2014: Issue 037
Language:
English
Publication Date:
26 Feb 2014
DOI:
https://doi.org/10.5089/9781484320143.001
ISBN:
9781484320143
ISSN:
1018-5941
Pages:
46
Keywords:
WP; IOSCO; business cycle; arbitrage pricing theory; Asian financial crisis; fundamentals; global financial crisis; idiosyncratic factors; integration; securities regulation; stock market; stock pricing; term structure of interest rates; Tokyo SE group; stock market return; Shenzhen SE; London SE group; market liquidity; stock market volatility; Asia's stock markets; Shanghai SE; Indonesia SE; Osaka SE; stock market capitalization; Santiago SE; Stock markets; Asset prices; Securities markets; Stocks; Asia and Pacific; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Stock markets play a key role in corporate financing in Asia. However, despite their increasing importance in terms of size and cross-border investment activity, the region’s markets are reputed to be more “idiosyncratic” and less reliant on economic and corporate fundamentals in their pricing. Using a model that draws on international asset pricing and economic theory, as well as accounting literature, we find evidence of greater idiosyncratic influences in the pricing of Asia’s stock markets, compared to their G-7 counterparts, beyond the identified systematic factors and local fundamentals. We also show proof of a significant relationship between the strength of implementation of securities regulations and the “noise” in stock pricing, which suggests that improvements in the regulation of securities markets in Asia could enhance the role of stock markets as stable and reliable sources of financing into the future.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund