Integration level of equity markets in APEC’s emerging countries: Are emerging markets regionally or globallyintegrated?

Abstract: Supported by the investment barriers removal, financial deregulation and improvedmacroeconomic policies during the last three decades, the process of financial integration inthose markets, emerging markets in general and emerging markets within Asia PacificEconomic Cooperation (APEC) in particular, has been pro-actively accessed these days.Moreover, recent trend in globalization in many APEC countries and especially in theemerging markets has triggered a stronger financial integration progress across countries.Nevertheless, it is surprising to find that these countries not only benefited from regionalfinancial integration but also experienced global financial integration in the same period.Markets over the last two decades, which have been highlighted by financial crises occurredamong those APEC emerging countries in the early of the year 1997, have raised political,social and economic questions. One of prominent questions among them: “Are emergingmarkets in APEC regionally or globally integrated?” has raised our interest in measuring theintegration level in these countries. Our thesis paper, therefore, seeks to answer the questionon the degree of financial integration level in nine APEC emerging countries. Collectingstock indexes from the Chile (Santiago Stock Exchange), China (Shanghai Stock Exchange),Indonesia (Indonesia Stock Exchange), Malaysia (Bursa Malaysia), Mexico (Mexican StockExchange), Philippines (Philippines Stock Exchange), Peru (Lima Stock Exchange), Russia(RTS Russian Stock Exchange), Thailand (Thailand Stock Exchange), we computeempirically the integration scores for these nine countries. We then compare the level ofglobal financial integration and regional financial integration for each market during theexamined time. Results of this study indicate that our nine sampling countries integrated indifferent levels. Not surprisingly when we conclude that the financial integration degree ofthose countries has not been stable over time due to various objective reasons that we alsoexamine through our literature review for individual market.