Table 4 Estimates of the SVAR model (...

Table 4

Estimates of the SVAR model (Eq. 1) including the spatial dependence matrix across the nine markets under study

	(a) Estimates of (stationary) spatial weights matrix of network interactions between East Asian equity markets
Weak dependence	MYS	IDN	PHL	THA	CHN	VNM	KOR	TWN	HKG	Lag	Fxd effects	KP underid	Hansen J	RMSE
MYS (Malaysia)			0.3242^**				0.3554^**			0.1447^***	−0.00023	0.0084	0.1048	0.0066
MYS (Malaysia)			(0.003, 0.645)				(0.031,0.680)			(0.066, 0.223)	−0.00023	0.0084	0.1048	0.0066
IDN (Indonesia)					−0.3819^*				0.3357^*	0.1265^**	0.00026	0.0264	0.4640	0.0103
IDN (Indonesia)					(−0.818, 0.055)				(−0.052, 0.723)	(0.027, 0.226)	0.00026	0.0264	0.4640	0.0103
PHL (The Philippines)									0.6330^***	0.0757^**	0.00053	0.0015	0.7046	0.0098
PHL (The Philippines)									(0.154, 1.112)	(0.001, 0.150)	0.00053	0.0015	0.7046	0.0098
THA (Thailand)					−0.3241^**			0.4152^**	0.2835^**	0.1255^***	0.00015	0.0146	0.6524	0.0089
THA (Thailand)					(−0.606, −0.042)			(0.013, 0.817)	(0.014, 0.553)	(0.061,0.190)	0.00015	0.0146	0.6524	0.0089
CHN (China)						0.1356^*				0.1735^***	−0.00013	0.0435	0.8349	0.0106
CHN (China)						(−0.019, 0.290)				(0.097, 0.250)	−0.00013	0.0435	0.8349	0.0106
VNM (Vietnam)		−0.6574^*		1.3059^***						0.3361^***	0.00102	0.0247	0.4962	0.0167
VNM (Vietnam)		(−1.319, 0.004)		(0.594,2.018)						(0.215, 0.457)	0.00102	0.0247	0.4962	0.0167
KOR (South Korea)			−0.5420⁺					0.5969^**	0.3757^*	−0.0041	0.00042	0.0379	0.5704	0.0085
KOR (South Korea)			(−1.138, 0.054)					(0.067,1.127)	(−0.025, 0.777)	(−0.078, 0.069)	0.00042	0.0379	0.5704	0.0085
TWN (Taiwan)		−0.9114^**		1.0639^*			0.6538^**			0.0409	0.00015	0.0495	0.3700	0.0137
TWN (Taiwan)		(−1.788, −0.034)		(−0.009, 2.138)			(0.077, 1.231)			(−0.103, 0.185)	0.00015	0.0495	0.3700	0.0137
HKG (Hong Kong)							0.7807^***			0.1744^***	0.00001	0.0274	0.6220	0.0106
HKG (Hong Kong)							(0.218, 1.343)			(0.051, 0.298)	0.00001	0.0274	0.6220	0.0106

	(a) Estimates of (stationary) spatial weights matrix of network interactions between East Asian equity markets
Weak dependence	MYS	IDN	PHL	THA	CHN	VNM	KOR	TWN	HKG	Lag	Fxd effects	KP underid	Hansen J	RMSE
MYS (Malaysia)			0.3242^**				0.3554^**			0.1447^***	−0.00023	0.0084	0.1048	0.0066
MYS (Malaysia)			(0.003, 0.645)				(0.031,0.680)			(0.066, 0.223)	−0.00023	0.0084	0.1048	0.0066
IDN (Indonesia)					−0.3819^*				0.3357^*	0.1265^**	0.00026	0.0264	0.4640	0.0103
IDN (Indonesia)					(−0.818, 0.055)				(−0.052, 0.723)	(0.027, 0.226)	0.00026	0.0264	0.4640	0.0103
PHL (The Philippines)									0.6330^***	0.0757^**	0.00053	0.0015	0.7046	0.0098
PHL (The Philippines)									(0.154, 1.112)	(0.001, 0.150)	0.00053	0.0015	0.7046	0.0098
THA (Thailand)					−0.3241^**			0.4152^**	0.2835^**	0.1255^***	0.00015	0.0146	0.6524	0.0089
THA (Thailand)					(−0.606, −0.042)			(0.013, 0.817)	(0.014, 0.553)	(0.061,0.190)	0.00015	0.0146	0.6524	0.0089
CHN (China)						0.1356^*				0.1735^***	−0.00013	0.0435	0.8349	0.0106
CHN (China)						(−0.019, 0.290)				(0.097, 0.250)	−0.00013	0.0435	0.8349	0.0106
VNM (Vietnam)		−0.6574^*		1.3059^***						0.3361^***	0.00102	0.0247	0.4962	0.0167
VNM (Vietnam)		(−1.319, 0.004)		(0.594,2.018)						(0.215, 0.457)	0.00102	0.0247	0.4962	0.0167
KOR (South Korea)			−0.5420⁺					0.5969^**	0.3757^*	−0.0041	0.00042	0.0379	0.5704	0.0085
KOR (South Korea)			(−1.138, 0.054)					(0.067,1.127)	(−0.025, 0.777)	(−0.078, 0.069)	0.00042	0.0379	0.5704	0.0085
TWN (Taiwan)		−0.9114^**		1.0639^*			0.6538^**			0.0409	0.00015	0.0495	0.3700	0.0137
TWN (Taiwan)		(−1.788, −0.034)		(−0.009, 2.138)			(0.077, 1.231)			(−0.103, 0.185)	0.00015	0.0495	0.3700	0.0137
HKG (Hong Kong)							0.7807^***			0.1744^***	0.00001	0.0274	0.6220	0.0106
HKG (Hong Kong)							(0.218, 1.343)			(0.051, 0.298)	0.00001	0.0274	0.6220	0.0106

	(b) Factor structure induced (nonstationary) effects of interactions across East Asian markets
Strong dependence	MYS	IDN	PHL	THA	CHN	VNM	KOR	TWN	HKG	Lag	Fxd effects	Long-run coefficients
E Asian market factor	0.1644	0.1623	0.1601	0.1652	0.0984	0.0804	0.1757	0.1686	0.1702			Factor	Lag
CHN (China)	0.0010	0.0010	0.0009	0.0010		0.0005	0.0010	0.0010	0.0010	0.0002	0.00012	0.0059	0.3024
KOR (South Korea)	0.0019	0.0018	0.0018	0.0019	0.0011	0.0009		0.0019	0.0019	0.0004	0.00050	0.0114	0.1879

	(b) Factor structure induced (nonstationary) effects of interactions across East Asian markets
Strong dependence	MYS	IDN	PHL	THA	CHN	VNM	KOR	TWN	HKG	Lag	Fxd effects	Long-run coefficients
E Asian market factor	0.1644	0.1623	0.1601	0.1652	0.0984	0.0804	0.1757	0.1686	0.1702			Factor	Lag
CHN (China)	0.0010	0.0010	0.0009	0.0010		0.0005	0.0010	0.0010	0.0010	0.0002	0.00012	0.0059	0.3024
KOR (South Korea)	0.0019	0.0018	0.0018	0.0019	0.0011	0.0009		0.0019	0.0019	0.0004	0.00050	0.0114	0.1879

Note(s): (1) Only statistically significant (at 10% level) estimates are presented: ^* (10%), ^** (5%) and ^*** (1%) level, with 95% confidence intervals in parentheses. (2) We regress returns in each market against the others and their own (lagged) values from the previous week, using instruments chosen from a large candidate set to address endogeneity. (3) Hansen J test (p-values) show that the instruments do not violate overidentifying restrictions (and are therefore valid instruments). The KP under-identification test (p-values) confirms that instruments have sufficient information content. (4) There is evidence of (spatial) strong dependence in the residuals. This relates to two major markets (China and Korea), where in addition to cross-market weak dependence, there is also evidence of impact of market-wide shocks, which is captured by a factor model including an aggregate East Asian market factor

Source(s): Computations by authors

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