| Summary: | The trade openness and lower barrier for the capital flows have increased the interdependence between the stock market and the foreign exchange market. This study examines the co-movement between the markets in ASEAN-5 member countries (Malaysia, the Philippines, Indonesia, Singapore, and Thailand) from January 1, 2017, to July 31, 2021, with the study period covered the COVID-19 pandemic. Hence, this study attempts to analyse the direction of risk transfer and the co-movement between the markets in different investment horizons during the COVID-19 pandemic.
In this study, Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model and the wavelet coherence are applied to examine the return and volatility co-movement between the markets. In line with the stock-oriented model, the results from wavelet coherence show negative correlations between the market returns. However, the direction of causality in return is ambiguous with stronger co-movement observed in volatility across markets. Finally, this study found strong co-movement across investment horizons during the COVID-19 pandemic. Thus, the portfolio manager can have a better understanding of the behaviour of the markets in different investment horizons and be able to make a more diversified investment portfolio.
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