The relationship between stock markets of major developed countries and Asian emerging markets
type: Item
instance of: scholarly article
title: The relationship between stock markets of major developed countries and Asian emerging markets
zbMATH Open document ID: 1181.91353
DOI: 10.1155/S1173912604000136
author: Wing-Keung Wong
author: Richard Deane Terell
author: Karen Yann Ching Lim
author: Jack H. W. Penm
published in: Journal of Applied Mathematics and Decision Sciences
publication date: 2005-06-21T00:00:00Z
full work available at URL: https://eudml.org/doc/116622
review text: Summary: With the emergence of new capital markets and liberalization of stock markets in recent years, there has been an increase in investors' interest in international diversification. This is so because international diversification allows investors to have a larger basket of foreign securities to choose from as part of their portfolio assets, so as to enhance the reward-to-volatility ratio. This benefit would be limited if national equity markets tend to move together in the long run. This paper thus studies the issue of co-movement between stock markets in major developed countries and those in Asian emerging markets using the concept of cointegration. We find that there is co-movement between some of the developed and emerging markets, but some emerging markets do differ from the developed markets with which they share a long-run equilibrium relationship. Furthermore, it has been observed that there has been increasing interdependence between most of the developed and emerging markets since the 1987 stock market crash. This interdependence intensified after the 1997 Asian financial crisis. With this phenomenon of increasing co-movement between developed and emerging stock markets, the benefits of international diversification become limited.
Mathematics Subject Classification ID: 91G70
Mathematics Subject Classification ID: 62P05
Mathematics Subject Classification ID: 62M10
zbMATH DE Number: 2177618
zbMATH Keywords: cointegration
zbMATH Keywords: international diversification
zbMATH Keywords: foreign securities
MaRDI profile type: Publication
description: scientific article; zbMATH DE number 2177618