金融Essay范文：Quantification of Stock Market Co-Movement Between Hong Kong and Singapore
本文是金融专业的Essay范例，题目是“Quantification of Stock Market Co-Movement Between Hong Kong and Singapore（香港与新加坡股市联动的量化研究）”，股市联动一直是金融界最重要的讨论之一。一般来说，共同运动指的是两个或两个以上变量之间的正相关关系(Barberis, 2002)。然而，要精确地解释这种正相关关系是一件复杂的事情。在金融学中，联合运动的定义是一种资产价格向另一种资产价格的变化(Baur,2004)。随着经济的日益全球化，股票市场的一体化程度引起了研究者和投资者的关注，以分析一个国家的股票价格与另一个国家的股票价格之间的联系，从根本上说，这是由于它与投资组合多样化等金融的各个方面有关，资产配置和风险管理(Hoque, 2007)。
1. Introduction介绍
Stock market co-movement has been one of the most significant discussions in finance. Generally, co-movement refer to the positive correlation between two or more variables (Barberis, 2002). However, the precise explanation of the positive relationship is complicated to depiction. In finance, the definition of co-movement is the changing of one asset price to another asset price (Baur,2004). Along with the increasingly globalised economy, the degree of stock markets integration has attracted much attention by researchers and investors to analyse the link between one national stock prices with another, fundamentally due to its fact of being related to every aspect of finance such as portfolio diversification, asset allocation and risk management (Hoque, 2007).
In this paper, we will attempt to quantify the stock market co-movement between Hong Kong and Singapore. As two of four “Asian tigers”, both Hong Kong and Singapore are advanced economy entities located in Southeast Asia (Young, 1992). They share considerable similarities in history, culture and financial aspects. Historically, both Singapore and Hong Kong had a past of been colonised by the United Kingdom (Chen,2016). Regarding culture, the majority of residences in Hong Kong and Singapore are ethnic Chinese, which accounts for more than eighty per cent of the total population (Young, 1992).
Economically, the scarcity of natural resources and small-scale landmass prompt Hong Kong and Singapore to rely heavily on international trade (Chen, 2016). Before becoming the world’s financial centres, each is changed the industry structure from labour incentive like clothing to high-tech to finance and banking service in the last decades (Chen, 2016). Moreover, Hong Kong and Singapore have been close business partners in various fields for decades, and they practically behave the same in economic performance and various rankings. For instance, Singaporean leading financial services groups such as DBS and OCBS, continuously expanding their business in Hong Kong in the last ten years (Ngiam, 2013). The GDP per capita for both Singapore and Hong Kong reached more than 40,000 dollars every year (Ngiam, 2013). Based on the global competitiveness report published by International Institute for Management Development (IMD) in 2019, Singapore and Hong Kong are the only two Asian regions in the top 10 of the ranking and won the first and second place respectively.
在经济上，自然资源的稀缺和小面积的陆地促使香港和新加坡严重依赖国际贸易(Chen, 2016)。在成为世界金融中心之前，在过去的几十年里，每个国家的产业结构都发生了变化，从服装等劳动力激励到高科技，再到金融和银行服务(Chen, 2016)。此外，香港和新加坡几十年来在多个领域都是密切的商业伙伴，在经济表现和各项排名方面几乎一致。例如，新加坡领先的金融服务集团如星展银行和华侨银行，在过去的十年中不断扩大在香港的业务(Ngiam, 2013)。新加坡和香港的人均GDP每年都超过4万美元(Ngiam, 2013)。根据国际管理发展学院(IMD) 2019年发布的全球竞争力报告，新加坡和香港是唯一两个进入前10名的亚洲地区，分别获得了第一和第二名。
The paper is structured as follows. Section 2 explores the theoretical framework. Section 3 examines the literature review regarding stock market co-movement. Section 4 and 5 demonstrate data and methodology, severally. Section 6 and 7 presents empirical results and analysis. Finally, conclusion and limitations are illustrated in section 8 and 9.
2. Theoretical Framework理论框架
2.1. The Modern portfolio theory现代投资组合理论
In finance, investment refers to the purchasing of assets that are likely to generate profit in the future (Groppelli and Nikbakht, 2006). The investment portfolio may consist of both tangible assets and intangible assets. The future performance of some intangible assets, such as stocks is unpredictable. The modern portfolio theory explains that after examining a series of assumptions, researchers find a way of balancing risks and returns to maximize investors satisfaction, it is also seen as the efficient frontier (Milne, 2004). The fundamental aim of the investment is to put different kinds of assets that have various risk and return level into a basket to achieve the most considerable profit by taking minimum risks (Groppelli and Nikbakht, 2006).
在金融领域，投资是指购买可能在未来产生利润的资产(gropelli和Nikbakht, 2006)。投资组合可以包括有形资产和无形资产。一些无形资产如股票的未来表现是不可预测的。现代投资组合理论解释说，在研究了一系列假设之后，研究者找到了一种平衡风险和回报的方法，以最大限度地提高投资者的满意度，这也被视为有效边界(Milne, 2004)。投资的根本目的是将风险和回报水平各不相同的不同种类的资产放入一个篮子中，以最小的风险获得最大的利润(Groppelli and Nikbakht, 2006)。
2.2. Diversification
Diversification is to invest in different assets that are not entirely correlated with one another to mitigate portfolio risks (Milne, 2004). In general, high profit comes with high risks. Fabozzi and Peterson (2003) claim that the portfolio risk cannot be removed entirely in any way as the same effects and innovations will have influences on assets. By investigating the standard deviation of randomly chosen portfolios, Hagin (2004) confirmed that portfolio volatility would decrease along with the increasing number of stocks added into the portfolio.
Diversification can be achieved by enlarging investment locations. Odier and Solnik (1993) find that international investment has significant advantages for investors to decrease risks since different economic entities have different cycles and structures. When one market behaves unfavourable, we may be still able to gain profit from another.
2.3. The Efficient Market Hypothesis (EMH)
The efficient market hypothesis is one of the most meaningful analyses in the finance field in the last twenty years. The efficient market hypothesis claims that stock price would adjust automatically when new information came into the market; this implies that the stock markets are integrated (Groppelli and Nikbakht, 2006). The degree of equity market efficiency has widely been used as an indication of integration. Under the assumption of information equivalence, expected risk and return will alter more consistently (Milne, 2004). No matter the conditions or recessions, every security should reflect its value accurately. Over time, benefits come from information asymmetric will no longer exist, and equity markets will finally become integrated (Groppelli and Nikbakht, 2006). While Bhattacharya and Constantinides (1989) hold an opposite view about the efficient market hypothesis; they believe that arbitrage opportunities are available as not every stock markets have the nature of these prerequisites.
3. Literature review文献综述
In the last decades, numerous pieces of literature estimated integration and co-movement among national stock markets. While earlier researches show that there is no support of long-run relationship was found. Chan et al. (1992) evaluate the relationships among equity markets in Singapore, Taiwan, Hong Kong, South Korea and the US during the 1980s period using daily and weekly data. By employ unit root and cointegration test, the result shows that there is no evidence of cointegration among the national share prices. This result reveals the success of universal diverseness among markets. Correspondingly, Ripley (1973) and Lessard (1976) also emphasise the advantages of invest in different stock markets to minimise portfolio risks as the research result reveal the low possibilities of stock market co-movement.
在过去的几十年里，大量的文献估计了国家股票市场的一体化和联动性。而早期的研究表明，没有发现长期关系的支持。Chan et al.(1992)利用每日和每周的数据评估了20世纪80年代期间新加坡、台湾、香港、韩国和美国股票市场之间的关系。通过单位根和协整检验，结果表明全国股票价格之间不存在协整的证据。这一结果揭示了市场普遍多元化的成功。相应的，Ripley(1973)和Lessard(1976)也强调了投资于不同的股票市场的优势，以最小化投资组合的风险，因为研究结果揭示了股票市场协同运动的可能性很低。
Some articles, in particular, analyse the cointegrating relationship of Asian stock market with inconsistent findings. The world’s first study regarding the common stochastic trends of Asian stock market is possibly conducted by Chung and Liu (1994). Chung and Liu use weekly data from 1 July 1985 to 18 May 1992, find two integrating relationships among six national indexes (including Taiwan, Singapore, Japan, Hong Kong, South Korea and the US). On the contrary, DeFusco et al. (1996) suggest that capital markets are segmented and there is no evidence of cointegration between the US and Asian markets (Thailand, Taiwan, South Korea, Malaysia and Philippines) using weekly data throughout January 1989 to May 1993. Similarly, Hee Ng (2002) build a system including five Association of Southeast Asian Nations (Indonesia, Philippines, Singapore, Indonesia and Thailand) examine monthly data from December 1988 to December 1997 and find non-existence of interdependency using Johansen (1988) multivariate test. Manning (2002) using both US dollar and local currencies dominated weekly data, as well as quarterly data during 1988 to 1999, illustrate the partial evidence of two common stochastic trends among Hong Kong, Singapore, Japan, South Korea, Indonesia, Phillippines, Thailand, and Malaysia.
The topic of stock market co-movement always been frequently mentioned or discussed by investors and researchers when particular financial events happen. For example, after the financial crisis in 1997 and 2008, people believed that the financial crisis would affect economics and stock market continuously and systematically, and the integration of financial can be captured by statistical methods to diversify their investment portfolios in the future. Jang and Sul (2002) divided the period of data into three stages, before, during and after the 1997 Asian financial crisis. By employ Granger causality model with a cointegration test, Jang and Sul (2002) examine whether the Asian stock markets (including Korea, Hong Kong, Singapore, Thailand, Japan, Indonesia and Taiwan) has co-movement. The results imply that no evidence of market cointegration was found between the seven Asian countries before the financial crisis. However, the linkage of Asian equity markets increased significantly from the starting time of the crisis in June 1997. Specifically, the co-movement among Hong Kong, Singapore, Thailand and Indonesia is remarkable. Further, eight months after the financial crisis, the connection between the seven national indexes present the most robust linkage occasionally. Our null hypothesis is that there is no cointegration between Hong Kong and Singapore stock market and the alternative hypothesis is stock market co-movement only happen when special events occur.
4. Data数据
The data used are adjusted closing prices for the period 1 January 1988 to 1 December 2019 consisted of 384 observations downloaded from Yahoo Finance. The indices used for stock market of Hong Kong and Singapore were the Hang Seng Index (HIS) and Straits Times Index (STI), separately. Hang Seng Index (HIS) is the most widely used indicator of Hong Kong stock market, tracks the top fifty firms listed on the Hong Kong Stock Exchange whereas Straits Times Index (STI) is the benchmark index for the Singapore stock market, which is made up of 30 constituents. Monthly data was selected since quarterly, and annual statistics always have spurious issues while daily data may also be influenced by the day of the week effect and its noise characterising problem (Roca, 1999).
使用的数据是1988年1月1日至2019年12月1日期间调整后的收盘价，包括从雅虎财经下载的384个观察结果。香港和新加坡的股市指数分别为恒生指数(HIS)和海峡时报指数(STI)。恒生指数(HIS)是香港股市使用最广泛的指标，追踪在香港交易所上市的前50家公司，而海峡时报指数(STI)是新加坡股市的基准指数，由30只成分股组成。从季度开始选择月度数据，而年度统计总是有虚假问题，而每日数据也可能受到星期几效应及其噪声特征问题的影响(Roca, 1999)。
Procedure: We transferred all the data into logarithmic forms before carrying out researches.
5. Methodology方法
5.1. Unit Root Test单位根检验
Before conducting a financial series analysis, it is vital to check the stationarity of data. Spurious regression may be generated due to non-stationary statistics, which indicate results may be biased. To address this problem, we use the Augmented Dickey-Fuller (ADF) test to check if the log-transformed adjusted closing price of Hang Seng Index and Straits Times Index (STI) have a unit root:
在进行财务系列分析之前，检查数据的平稳性是至关重要的。由于统计量的非平稳，可能会产生伪回归，结果可能存在偏倚。为了解决这个问题，我们使用Augmented Dickey-Fuller (ADF)检验，检验恒生指数和海峡时报指数(STI)经对数变换后的调整收盘价是否有单位根:
Where yt represents stock market index, μ is a constant parameter and ut is a disturbance term. Our null hypothesis is yt has a unit root and alternative hypothesis is there is yt does not have unit root (Hannan, 1983).
5.2. Cointegration Test
After completing the unit root test, the results suggest that both variables are non-stationary. We first differenced each variable and got significant statistics, which indicate the two variables are stationary at first differenced level. Consequently, we can move on to the cointegration test. In this paper, Engle and Granger Cointegration Test is employed to investigate the co-movement of Hong Kong and Singapore stock market:
where yt is Straits Times Index (STI), α is the constant term,xt is the Hang Seng Index (HSI) price and εt represents residual term. The null hypothesis is no cointegration between Hang Seng Index (HSI) and Straits Times Index (STI); alternative hypothesis is there are evidence of long-run relationship between them (Hannan, 1983).
6. Test results测试结果
6.1. Unit root test results单位根检验结果
Table 1 demonstrates the unit root test results. It is shown that both the Hang Seng Index (HSI) and Straits Times Index (STI) share price is non-stationary in logarithmic form, but stationary in first differenced level. The results imply that the two indices are integrated of order one. Subsequently, we could perform a co-integration test for Hong Kong and Singapore stock market.
表1显示了单位根检验结果。结果表明，恒生指数和海峡时报指数的股价在对数上都是非平稳的，但在一阶差分水平上都是平稳的。结果表明，这两个指标是阶积分的。随后，我们可以对香港和新加坡股市进行协整检验。
6.3. Co-integration test results
Table 2 illustrate the co-integration test results. It is seen that there is no co-integration between Hong Kong and Singapore national indices. Specifically, by comparing the t-statistics with critical values supplied by Engle and Yoo (1987), there is no evidence of stock price co-movement can be found. (t=-2.597288, p<-3.02).
7. Discussion on the empirical results对实证结果的讨论
Three reasons may cause the absence of co-movement between Singapore and Hong Kong. Firstly, the insignificant results of the cointegration test imply that the possibilities of diversification of an international portfolio in stock markets are efficient for investors of Hong Kong and Singapore. These results are in line with the findings of Wong (2004) that also did not find a long-run relationship between Singapore and Hong Kong. However, Srinivasan, Kalaivani and Devakumar (2013) claim that there is cointegration among major Asia-Pacific economic entities (including Hong Kong, Singapore, China, South Korea, Taiwan, Japan and Indonesia).
新加坡与香港缺乏合作可能有三个原因。首先，协整检验的不显著结果表明，对于香港和新加坡的投资者来说，国际投资组合在股票市场上的多元化可能性是有效的。这些结果与Wong(2004)的发现一致，Wong(2004)也没有发现新加坡和香港之间的长期关系。然而，Srinivasan, Kalaivani and Devakumar(2013)认为亚太地区主要经济实体(包括香港、新加坡、中国、韩国、台湾、日本和印度尼西亚)之间存在协一体化。
Secondly, each Hong Kong and Singapore have closer neighbours, which are China and Southeast Asian Nations (ASEAN), respectively. The “China factor” in the Hong Kong stock market should not be underestimated. Su, Chong and Yan (2007) explore the possible share prices co-movement between Mainland China and Hong Kong indices before, and after the introduction of the Closer Economic Partnership Arrangement (CEPA) in 2003. They state that a massive number of A shares and H shares start to have a cointegrating relationship after the agreement was launched. Moreover, the establishment of the Shanghai-Hong Kong Stock Connect Program (SHSCP) in 2014 further deepened the influence of Mainland China on the Hong Kong stock market. This assumption is supported by the study from Xu (2017).
Association of Southeast Asian Nations (ASEAN) was set up in 1967, initially consist of five countries, comprise as Singapore, Indonesia, Malaysia, Philippines and Thailand (ASEAN | ONE VISION ONE IDENTITY ONE COMMUNITY, 2019). According to the investing report by ASEAN (2019), the total GDP of its constitute reached 2.8 trillion dollars in 2017, which make them became the sixth-largest economy globally. Shabri Abd. Majid (2009) point that although ASEAN countries are cointegrated with each other before the 1997 Asian financial crisis, at the time when the financial crisis happen, ASEAN stock market co-movement reached a peak.
8. Conclusion结论
This paper analyses the stock market co-movement between Hong Kong and Singapore. Using monthly data from 1988 to 2019 of the Hang Seng Index (HSI) and the Straits Times Index (STI), we conclude that there is no cointegrating relationship between the two indices. This result indicates that investing in Hong Kong is a decent choice for investors to diversify their portfolio who hold a substantial investment in Singapore, and vice versa. Future research can investigate more frequent data, such as daily or weekly. The other directions for future research are to analyse the spillover effect using volatility models.
本文分析了香港和新加坡股市的联动。利用1988年至2019年恒生指数和海峡时报指数的月度数据，我们得出两个指数之间不存在协整关系的结论。这个结果显示，对于在新加坡持有大量投资的投资者来说，投资香港是一个不错的选择，以分散投资组合;反之亦然。未来的研究可以调查更频繁的数据，如每日或每周。未来研究的另一个方向是利用波动率模型分析溢出效应。
9. Limitations限制
There are two main limitations presented in this paper. Firstly, we chose a long period as a sample without taking into account the impact of events that might have occurred during that period that would have affected the outcome. Secondly, the study can be improved by dividing the time into stages to draw more specific conclusions.
本文提出了两个主要的局限性。首先，我们选择了一个较长的时期作为样本，而没有考虑到在那个时期可能发生的影响结果的事件的影响。其次，可以将研究时间划分为阶段，从而得出更具体的结论。
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