Integration of 22 emerging stock markets: A three-dimensional analysis

Michael Graham, Jarno Kiviaho and Jussi Nikkinen

Global Finance Journal, 2012, vol. 23, issue 1, 34-47

Abstract: We apply the three-dimensional analysis of wavelet coherency to examine the integration of 22 emerging stock markets with the U.S. market. We find a high degree of co-movement at relatively lower frequencies between the U.S. and the 22 individual emerging markets. Our results show that the strength of co-movement, however, differs by country. For example, we report a high degree of co-movement between the U.S. and Brazil, Mexico and Korea, but low co-movement with and Egypt and Morocco. Our analyses also document a general change in the pattern of the market relationship after 2006, where we detect co-movements at relatively higher frequencies. Co-movement at the highest frequencies is, however, weak for fluctuations with duration less than a year. Our findings imply that investing selectively in emerging markets may provide significant diversification benefits which, invariably, depend on the investment horizon.

Keywords: Stock market integration; Co-movement; Diversification; Emerging markets; Wavelet analysis (search for similar items in EconPapers)
JEL-codes: C40 E32 F30 G11 G15 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (75)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:23:y:2012:i:1:p:34-47

DOI: 10.1016/j.gfj.2012.01.003

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