el

Time series test of nonlinear convergence and transitional dynamics

Journal Article
Terence Tai-Leung Chong, Melvin J. Hinich, Venus Khim-Sen Liew and Kian-Ping Lim
2008, Economics Letters, Elsevier, 100(3), 337-339

Abstract

This paper revisits the income convergence hypothesis by using the nonlinear unit root test of Kapetanios et al. [Kapetanios, G., Shin, Y. and A. Snell, 2003. Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics 112, 359–379.]. Out of the 12 OECD income gaps in which nonlinearity has been detected, two cases of long-run converging and four cases of catching up are found.

Keywords

OECD; Long-run convergence; Catching up; Nonlinear unit root test

afel

Sectoral impact of shocks: Empirical evidence from the Malaysian stock market

Journal Article
Kian-Ping Lim
2008, Applied Financial Economics Letters, Taylor and Francis, 4(1), 35-39

Abstract

The present study adopts the framework of Lim et al. (2006) who conjectured that the existence of nonlinear serial dependencies is due to shocks that unsettled the market and caused large deviations from equilibrium. Specifically, this article extends the investigation to shed further light on whether different economic sectors of the Malaysian stock market are subjected to the same shocks effects. The results reveal that the Russian crisis, negative economic outlook, unorthodox capital control measures, increased political tension, uncertainty over Central Limit Order Book issue, and the imposition of repatriation levy, have sent shock waves throughout the domestic stock market.

Keywords

Nonlinearity; Bicorrelation; Event study; Stock market; Malaysia

 

 

sef

Sectoral efficiency of the Malaysian stock market and the impact of the Asian financial crisis

Journal Article
Kian-Ping Lim
2008, Studies in Economics and Finance, Emerald Group Publishing, 25(3), 196-208

sef2008

jifmim

Nonlinear serial dependence and the weak-form efficiency of Asian emerging stock markets

Journal Article
Kian-Ping Lim, Robert D. Brooks and Melvin J. Hinich
2008, Journal of International Financial Markets, Institutions and Money, Elsevier, 18(5), 527-544

Abstract

The objective of this paper is to re-examine the weak-form efficiency of 10 Asian emerging stock markets. Using a battery of nonlinearity tests, the statistical results reveal that all the returns series still contain predictable nonlinearities even after removing linear serial correlation from the data. The next stage of sub-sample analysis using the Hinich [Hinich, M., 1996. Testing for dependence in the input to a linear time series model. Journal of Nonparametric Statistics 6, 205–221] bicorrelation test shows that the 10 Asian series follow a pure noise process for long periods of time, only to be interspersed with brief periods of strong nonlinear dependence. The exploratory investigation found that the cross-country differences in nonlinear departure from market efficiency can be explained by market size and trading activity, while the transient burst of nonlinear periods in each individual market can be attributed largely to the occurrence of economic and political events.

Keywords

Predictability; Nonlinearity; Market efficiency; Emerging markets; Asia

irfa

Financial crisis and stock market efficiency: Empirical evidence from Asian countries*

Journal Article
Kian-Ping Lim, Robert D. Brooks and Jae H. Kim
2008, International Review of Financial Analysis, Elsevier, 17(3), 571-591

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Abstract

This paper empirically investigates the effects of the 1997 financial crisis on the efficiency of eight Asian stock markets, applying the rolling bicorrelation test statistics for the three sub-periods of pre-crisis, crisis, and post-crisis. On a country-by-country basis, the results demonstrate that the crisis adversely affected the efficiency of most Asian stock markets, with Hong Kong being the hardest hit, followed by the Philippines, Malaysia, Singapore, Thailand and Korea. However, most of these markets recovered in the post-crisis period in terms of improved market efficiency. Given that the evidence of nonlinear serial dependencies indicates equilibrium deviation resulted from external shocks, the present findings of higher inefficiency during the crisis are not surprising as in the chaotic financial environment at that time, investors would overreact not only to local news, but also to news originating in the other markets, especially when the news events were adverse.

Keywords

Market efficiency; Asian crisis; Stock market; Nonlinear serial dependence; Bicorrelation

physica

Ranking of efficiency for stock markets: A nonlinear perspective

Journal Article
Kian-Ping Lim
2007, Physica A: Statistical Mechanics and Its Applications, Elsevier, 376, 445-454

Abstract

The present paper demonstrates, via a rolling sample approach, that the stylized fact of nonlinear dependence in stock returns is quite localized in time, suggesting that market efficiency evolves over time. Given that the rolling sample framework is able to detect periods of efficiency/inefficiency, the relative efficiency of stock markets can easily be assessed by comparing the total time windows these markets exhibit significant nonlinear serial dependence. It was found that the US market is the most efficient while Argentine is at the end of the ranking.

Keywords

Nonlinear dependence; Bicorrelation; Market efficiency

afel

Nonlinear mean reversion in stock prices: Evidence from Asian markets

Journal Article
Kian-Ping Lim and Venus Khim-Sen Liew
2007, Applied Financial Economics Letters, Taylor and Francis, 3(1), 25-29

Abstract

Utilizing the standard linearity test of Luukkonen et al. (1988), the linear nature of all the Asian stock indices has been formally rejected. This finding warrants use of the nonlinear stationary test of Kapetanois et al. (2003), which is also constructed in the STAR framework, to investigate the mean reverting property of the stock prices series. As a whole, this study not only found convincing evidence of a nonlinear mean reverting pattern in all the Asian stock indices, but also demonstrates the risk of drawing the wrong inferences on mean reversion when the ADF test is applied to data governed by nonlinearity.

Keywords

Nonlinearity; Mean reversion; Smooth transition autoregressive (STAR); Asian; Stock market

jemf

Statistical inadequacy of GARCH models for Asian stock markets: Evidence and implications

Journal Article
Kian-Ping Lim, Melvin J. Hinich and Venus Khim-Sen Liew
2005, Journal of Emerging Market Finance, Sage, 4(3), 263- 279

Abstract

This study employs the Hinich portmanteau bicorrelation test (Hinich 1996; Hinich and Patterson 1995) as a diagnostic tool to determine the adequacy of Generalised Autoregressive Conditional Heteroscedasticity (GARCH) models for eight Asian stock markets. The bicorrelation test results demonstrate that this type of model cannot provide an adequate characterisation for the underlying process of all the selected Asian stock markets. Further investigation using the windowed test procedure reveals that the violation of the covariance stationarity assumption as required by the GARCH process is due to the presence of transient epochs of dependencies in the data. The inadequacy of GARCH models has strong implications for the pricing of stock index options, portfolios selection, development of optimal hedging techniques and risk management.

Keywords

GARCH; Non-stationarity; Data generating process; Bicorrelation; Asian stock markets

EB

Non-linear market behavior: Events detection in the Malaysian stock market

Journal Article
Kian-Ping Lim and Melvin J. Hinich
2005, Economics Bulletin, 7(6), 1-5

Abstract

This paper advocates a reverse from of event studies that is data−dependent to determine endogeneously the events that trigger non−linear market behavior. Using the Malaysian stock market as our case study, coupled with the ‘windowing’ approach proposed by Hinich and Patterson (1995), the present study is able to identify major political and economic events that contributed to the short bursts of non−linear behavior. The present framework can be extended to individual firm to examine the adjustment of its stock price to firm−specific events, which will provide deeper insight into issues on corporate finance.

Keywords

Nonlinearity; Event study; Bicorrelation; Malaysia; Stock market

EB

Income divergence? Evidence of non-linearity in the East Asian economies

Journal Article
Venus Khim-Sen Liew and Kian-Ping Lim
2005, Economics Bulletin, 15(1), 1-7

Abstract

This study examines the issue of income convergence in the East−Asian economies from the non−linear point of view. It is shown in this study that the income gaps between Japan and the rest of the East−Asian economies exhibit nonlinearities. It is further shown that after taking non−linearity into consideration, China, Indonesia, Malaysia, Thailand and the Philippines exhibit divergence behaviour with respect to Japan’s income, whereas Hong Kong, Korea, Taiwan and Singapore show otherwise.

Keywords

Income convergence; Nonlinearity; Japan; East Asia