This study investigates dynamic relationship of stock market valuation between ASEAN and financial center. Dynamic relations between stock market valuation reflects fundamental changes in stock that are driven by common global factors across markets. We model the relations in form of error correction model using two popular valuation proxies: Price to Earnings (PE) and Price to Book value (PB) with growth differential, inflation differential and global policy uncertainty index as the control variables. We estimate the model using the methodology developed by Kripfganz and Scheneider (2018) on a monthly dataset of 5 ASEAN countries and 4 financial centers between March 2010 to December 2021. We find positive and highly significant long-run relations and error correction mechanisms between ASEAN stock market valuation and those of financial center. The pattern is quite varied at country level perhaps

due to country specific characteristics.

Highlights

• This paper looks at the long-term relationship of the financial center stock market valuation to the stock market valuation of ASEAN countries by looking at the pattern of relationships in the aggregate market and between countries using stock market valuation.
• Our finding is important to improve our current understanding on relationship that subsequently critical for better policy design.