摘要：With the emergence of new capital markets and liberalization of stock markets
in recent years, there has been an increase in investors' interest in international
diversification. This is so because international diversification allows investors to have
a larger basket of foreign securities to choose from as part of their portfolio assets, so
as to enhance the reward-to-volatility ratio. This benefit would be limited if national
equity markets tend to move together in the long run. This paper thus studies the issue
of co-movement between stock markets in major developed countries and those in Asian
emerging markets using the concept of cointegration. We find that there is co-movement
between some of the developed and emerging markets, but some emerging markets do
differ from the developed markets with which they share a long-run equilibrium relationship.
Furthermore, it has been observed that there has been increasing interdependence
between most of the developed and emerging markets since the 1987 Stock Market Crash.
This interdependence intensified after the 1997 Asian Financial Crisis. With this phenomenon
of increasing co-movement between developed and emerging stock markets,
the benefits of international diversification become limited.
