The Evolution of Interdependence in World Equity Markets - Evidence from Minimum Spanning Trees

Ricardo Coehlo, Claire Gilmore and Brian M. Lucey ()

The Institute for International Integration Studies Discussion Paper Series from IIIS

Abstract: The minimum spanning tree concept from physics is used to study the process of market integration for a large group of national stock market indices. We show how the tree grows over time and describe the dynamics of its various characteristics. Over the period studied, 1997-2006, the tree shows a tendency to become less bushy. This implies that global equity markets are increasingly interrelated. The consequence for global investors is a potential reduction of the benefits of international portfolio diversification.

Keywords: Econophysics; minimal spanning trees (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-fmk and nep-rmg
Date: 2006-05-25
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