This study seeks to investigate the degree of long-term and short-term co-movements in the stock markets of Indonesia, Malaysia, Philippines, Singapore, and Thailand. Through our findings, we hope to gain a better understanding of the long-term and short-term market dynamics in this South East Asian region. We observe a long-run relationship among the stock markets of Indonesia, Malaysia, Philippines, Singapore, and Thailand. Thus, five cointegrated markets reveal long-term market inefficiency in the region. The numbers of common cycles are investigated in these markets and each stock index series is decomposed into its trend and cyclical components. Next, we look at the influence of macroeconomic variables on the stock prices of ASEAN-5 countries. We observe both long-term and short- term relationships between stock indices and their macroeconomic variables. Furthermore, we consider the impact from foreign stock markets, and the result reveals that foreign stock markets have a greater influence on domestic stock price than that of domestic macroeconomic variables. The result may imply that when policymakers seek to pursue an independent macroeconomic policy, they need to consider not only macroeconomic factors, but also the impact of market integration.

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