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Time-varying Stock Market Integration and Diversification Opportunities within Developed Markets (Using Aggregated data approach)

Time-varying Stock Market Integration and Diversification Opportunities

Authors

  • Sultan Salahuddin Benazir Bhutto Shaheed University, Karachi
  • Salman Sarwat Benazir Bhutto Shaheed University, Karachi
  • Umair Baig Benazir Bhutto Shaheed University, Layri Karachi
  • Mudassir Hussain Benazir Bhutto Shaheed University, Karachi

DOI:

https://doi.org/10.51153/mf.v17i1.535

Keywords:

Sock market integration, Diversification opportunities, Developed markets, VECM

Abstract

This study examines the time-varying feature of Developed stock markets to identify diversification opportunities. For this purpose, we sample 21 developed countries ranging from 2000-2018 from the Pacific Region, Northern Europe, Western Europe, Southern Europe, and G7, with each region consisting of a panel with one home country and other as remaining countries portfolio. We applied Panel co-integration and VECM to test the stock market integration and diversification opportunities in short and long run. Our results indicate few short and long-run diversification opportunities for international investors in the post-crisis period that are more relevant. Canada, Japan, and Italy have long-run opportunities for diversification in the G7, and only Japan has short-run opportunities for diversification. Hong Kong and Japan have short-and long-run opportunities for diversification in the Pacific region. In the Northern Europe region, we have only the short-run diversification option of the UK and Norway. In the Western European Region, Australia and Switzerland have long-term diversification. There are no long and short-run diversification opportunities in the Southern European Region in the post-crisis period.

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Published

2022-06-26

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Vol. 17 No. 1 (2022): Market Forces Research Journal Volume 17 Issue 1

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