STOCK MARKET INTERDEPENDENCE BETWEEN MALAYSIA, INDONESIA AND SINGAPORE DURING ECONOMIC STABILITY AND CRISES: A DCC-GARCH MODEL APPROACH
DOI:
https://doi.org/10.33736/ijbs.14460.2026Keywords:
ASEAN, DCC-GARCH, market integration, co-movement, crisis, portfolio diversificationAbstract
Financial market integration has become increasingly important for investors and policymakers, particularly during economic turbulence, which amplifies systematic risks and reduces diversification opportunities. This study examines the integration and co-movements of Malaysia’s stock market with its neighbouring ASEAN countries, Indonesia and Singapore, using weekly data from January 2004 to December 2023. A regime-based approach is adopted by dividing the analysis into pre-crisis, crisis, and post-crisis periods across two major global events: the Global Financial Crisis and COVID-19 pandemic. The analysis applies Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH) models to capture time-varying market interdependence. The findings reveal that stock market correlations intensified during crises periods, indicating stronger financial integration among the selected ASEAN markets. The results further demonstrate that the Global Financial Crisis exerted a more pronounced influence on market interdependence than the COVID-19 pandemic. These findings suggest that investors and portfolio managers should adopt dynamic and adaptive investment strategies in response to changing market conditions. This study also contributes to the understanding of regional financial integration and highlights its important role in supporting efficient capital allocation and sustainable economic cooperation within ASEAN.
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