The stock market lets investors participate in the financial achievements of the companies whose shares they hold (Karolyi, 2000). (Brigham, et al. 2002) states that the stock market can be split into two main sections: the primary market and the secondary market. The primary market is where new issues are first sold through initial public offerings. Institutional investors typically purchase most of these shares from investment banks. On the other hand, all subsequent trading goes on in the secondary market where participants include both institutional and individual investors. He also noted that investors realize that stock markets affect each other and are affected by each other too. As (Mayo, 2004) points out, this interdependence or correlation …show more content…
He found interdependence in different directions for the proceeds of such markets (first moment interdependence). He provided evidence for volatility interdependence in different directions too (second moment interdependence). (Karolyi, 2000) has studied the mutual relation between the markets of the United States of America (USA) and Canada, whereas he referred to understanding the interdependence between these two markets, which depends on the way of coining the measurement pattern. Many financial researchers studied the Asian financial markets. Bahng (2003) studied the relation among the markets of Japan, China and South-Korea using different econometric methods. He found a strong asymmetric effect among such markets. On the other hand, another study by (Worthington, 2004) showed a positive effect for volatility in the developed markets (i.e. Hong Kong and Singapore) in comparison with the new markets (i.e. Indonesia, Malaysia, Philippines and Taiwan), but such effect wasn't considered to be