Stock Market Linkages in Emerging Markets: Implications for International Portfolio Diversification

26 Pages Posted: 9 Jul 2004

See all articles by Fabiola Ravazzolo

Fabiola Ravazzolo

City University London

Kate Phylaktis

City University London - Sir John Cass Business School

Abstract

This paper examines stock market linkages of a group of Pacific-Basin countries with U.S. and Japan by estimating the multivariate cointegration model in both the autoregressive and moving average forms over the period 1980-1998. Recursive estimation helps identify the evolution of the linkages. The results for the 1980s indicate that the relaxation of foreign ownership restrictions was not sufficient to attract foreign investors' attention and that other factors must have affected the portfolio diversification decision. The results of the 1990s suggest that the relaxation of the restrictions might have strengthened international market interrelations. Country Funds have provided access to highly regulated capital markets.

Keywords: Capital market linkages, emerging markets, common stochastic trends, international portfolio diversification

JEL Classification: F36, G15

Suggested Citation

Ravazzolo, Fabiola and Phylaktis, Kate, Stock Market Linkages in Emerging Markets: Implications for International Portfolio Diversification. Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=562922 or http://dx.doi.org/10.2139/ssrn.562922

Fabiola Ravazzolo

City University London ( email )

Frobisher Crescent
Barbican Centre
London, EC1V OHB
United Kingdom
(44) 171 477 8881 (Fax)

Kate Phylaktis (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 70408735 (Phone)
+44 20 70408881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/k.phylaktis/

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