Asia’s Stock Markets: Are There Crouching Tigers and Hidden Dragons?

February 26, 2014

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Format: Chicago

Fabian Lipinsky, and Li L Ong. Asia’s Stock Markets: Are There Crouching Tigers and Hidden Dragons?, (USA: International Monetary Fund, 2014) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Asset prices, Financial institutions, Financial markets, Financial regulation and supervision, Prices, Securities markets, Securities regulation, Stock markets, Stocks

Keywords: Arbitrage pricing theory, Asia and Pacific, Asian financial crisis, Asia's stock markets, Asset prices, Business cycle, Fundamentals, Global, Global financial crisis, Idiosyncratic factors, Indonesia SE, Integration, IOSCO, London SE group, Market liquidity, Osaka SE, Santiago SE, Securities markets, Securities regulation, Shanghai SE, Shenzhen SE, Stock market, Stock market capitalization, Stock market return, Stock market volatility, Stock markets, Stock pricing, Stocks, Term structure of interest rates, Tokyo SE group, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/037
Stock No:

WPIEA2014037
ISBN:

9781484320143
ISSN:

1018-5941

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