This study analyses weekly stock indices for ten equity markets of Asia pacific region for the period January 1, 2001 to June 30, 2013 to explore the long run relationship among Karachi stock exchange and Asia Pacific equity markets . These markets include Hong Kong, Singapore, Indonesia, Korea, Malaysia, Pakistan, Taiwan, India and china. Multivariate Cointegration and VAR procedures are performed to observe the long term dynamic relationships among these market Results show that Karachi stock exchange is best performing market for the period under study as it offers the highest return at relatively low risk level. Multivariate Cointegration analysis provides an evidence of a single cointegrating equation among the markets studied. The results of the bivariate Cointegration tests indicate that the Pakistani stock market is not individually integrated with any of the emerging Asia Pacific markets except Hong Kong and Taiwan. Granger causality tests reveal a casual flow from Korea, Hong Kong, Taiwan and Indian indices to Karachi stock exchange index. This unidirectional causality is indicator of lead-lag relationship amongst them. Variance decomposition analysis shows that Karachi Stock Exchange (KSE) is exogenous as most of its vibrations are explained by its own unique shocks. Above results explain that international investors can derive the benefits of portfolio diversification and any volatility in emerging Asia Pacific markets does not expose the international investors in Karachi stock exchange to any immediate threat of spill over effect.
Book Review: Towards A Common Future: Understanding Growth, Sustainability in the Asia-Pacific Region edited by Banik, A., Barai, M. K. and Suzuki, Y. (Palgrave Macmillan; 1st Edition (2017), Pages: 366)