Modelling evolving long-run relationships: the linkages between stock markets in Asia

This paper examines the linkages between the stock markets in Asia during t he 1977-1999 period using recently-developed co-integration techniques that allow for structural shifts in the long-run relationship. Our results sugg est that, if we apply conventional co-integration tests, we do not find evi dence of a long run relationship between the Asian stock markets. In contra st, if we introduce the possibility of structural breaks, we find strong ev idence in favour of such relationship between the Taiwanese and Japanese in dices from October 1987, while some marginal co-integration is detected bet ween Singapore and Japan until February 1992 and between Korea and Japan fr om April 1987. (C) 2001 Elsevier Science B.V. All rights reserved.