International Portfolio Diversification - Role of Emerging Economies-US Integration and Dynamic Linkages: An Empirical Study

Ranjan Dasgupta

International Journal of Economics and Finance, 2016, vol. 8, issue 6, 100

Abstract: This paper presents a comprehensive research by studying the cointegration and dynamic linkages of emerging economies all over the world with special emphasis to the US and India to point out the most attractive of them for international portfolio diversification with a lengthy data set of 2003-12 by using appropriate methodologies. It is found that the Indian stock market has short-run granger relationships with most of its BRIC counterparts and some others. In the long-run, nine co-integration relationships are found. It implies that all these stock markets are cointegrated. The US dominance on most markets and dynamic linkages with them has been proved, at least in the short-run. Overall, this study has found that the emerging economies stock markets and Russia don’t provide any portfolio diversification opportunity for the US and other investors.

Date: 2016
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