Publication Type
Journal Article
Version
acceptedVersion
Publication Date
11-1999
Abstract
Using transactions data for the Kuala Lumpur Stock Exchange and the Stock Exchange of Singapore (SES) for a major Malaysian conglomerate, Sime Darby Berhad, and intraday exchange rate data, we investigate whether and to what extent each exchange contributes to price discovery. Results indicate that the price series are cointegrated. The raw data appear to indicate the presence of arbitrage opportunities, but none exist after taking exchange rate changes into account. Using the common long-memory factors of Gonzalo and Granger (1995, Journal of Business and Economic Statistics 13, 1-9), we show that while the majority of the price discovery (approximately 70%) occurs in the home country (Malaysia), the 26-32% of the price discovery attributable to the SES is statistically significant and exceeds Singapore's share of the trading volume. Further, we find evidence of strong error correction of Singapore prices to Malaysian prices, but only weak error correction of Malaysian prices to Singapore prices.
Keywords
Price discovery, Error correction, Common long memory components, Singapore
Discipline
Asian Studies | Business | Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Multinational Financial Management
Volume
9
Issue
3-4
First Page
317
Last Page
329
ISSN
1042-444X
Identifier
10.1016/s1042-444x(99)00005-5
Publisher
Elsevier
Citation
DING, David K.; Harris, Frederick H.; LAU, Sie Ting; and Mclnish, Thomas H..
An Investigation of Price Discovery in Informationally-Linked Markets: Equity Trading in Malaysia and Singapore. (1999). Journal of Multinational Financial Management. 9, (3-4), 317-329.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/1164
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/s1042-444x(99)00005-5
Included in
Asian Studies Commons, Finance and Financial Management Commons, Portfolio and Security Analysis Commons