We analyze the ASEAN stock markets from a market microstructure perspective, focusing on liquidity and volatility. We find Indonesia and Thailand share similar patterns and magnitude of liquidity and volatility, indicating partial integration happens naturally for these two markets. Further analysis on the sensitivity of stock exchange performance to international information reveals that, again,
... [Show full abstract] Indonesia and Thailand are the most sensitive to international financial market information. This finding indicates that Indonesia and Thailand may have substantial foreign investors’ presence in their stock markets. Further empirical evidence shows that while integration would provide greater liquidity in ASEAN stock markets, the liquidity risk is also transmitted among them. We find the transmission of systematic liquidity risk in the region could happen in only one day. Our analysis of dynamic integration reveals time-varying integration in the ASEAN region from 2000 to 2012. Without government intervention, ASEAN capital markets show the most stable integration during 2005-2007. Unfortunately, integration does not hold in the long-term or it is short term in nature.