The degree of Asian-European markets connectedness: examining the impact of global disorders using a spectral analysis

Abstract

Purpose

This paper aims to examine potential diversification benefits between Eurozone (i.e. EURO STOXX 50) and key Asia markets: HSI (Hong Kong), KOSPI (South Korea), NIKKEI 225 (Japan) and TSEC (Taiwan). The sample covers the period from 04-01-2008 to 19-10-2023 in daily frequency.

Design/methodology/approach

The empirical investigation is based on the wavelet coherence analysis, which is a localized correlation coefficient in the time and frequency domain.

Findings

The results provide evidence that long-term diversification benefits exist between EURO STOXX and NIKKEI, EURO STOXX and KOSPI (after 2015) and there are signs for the pair and EURO STOXX-TSEC (after 2014). During the short term, there are signs of diversification benefits during the sample period. However, during the medium term, the diversification benefits seem to diminish.

Originality/value

These results have crucial implications for investors regarding the benefits of international portfolio diversification.

Citation

Dimitriou, D., Goulas, E., Kallandranis, C., Tsioutsios, A. and Ta, T.N.B.T.N. (2024), "The degree of Asian-European markets connectedness: examining the impact of global disorders using a spectral analysis", Journal of Asia Business Studies, Vol. 18 No. 3, pp. 850-862. https://doi.org/10.1108/JABS-11-2023-0475