Academic Journals Database
Disseminating quality controlled scientific knowledge

ASIAN EMERGING ECONOMIES AND UNITED STATES OF AMERICA: DO THEY OFFER A DIVERSIFICATION BENEFIT?

ADD TO MY LIST
 
Author(s): Preeti Sharma

Journal: Australian Journal of Business and Management Research
ISSN 1839-0846

Volume: 1;
Issue: 4;
Start page: 85;
Date: 2011;
VIEW PDF   PDF DOWNLOAD PDF   Download PDF Original page

Keywords: Asian Emerging Markets | Diversification | Stock Market

ABSTRACT
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 paper, thus, studies the issue of co-movement between Asian emerging stock markets and developed economies using the concept of co-integration. 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. We have seen that stock markets behavior is random. Several researches have shown that stock markets moves in random and does not affected by any fundamentals. Some authors describe that global sentiments and fundamentals does not prove fruitful in studying the movement of stock markets. Several investment bankers and speculators daily predict the stock market movements of one economy on the basis of stock market movements of another economy. Researches have been conducted with the purpose of finding out the potential for investors to gain from investments in different economies. The paper analyzes the interdependence (if any) of developing or emerging Asian economies and United States of America. And, thus these trends can help the investors to diversify their portfolios. This study is conducted with the objective of finding out the potential for diversification in selected Asian countries and United States of America by studying correlations in the index returns.

Tango Rapperswil
Tango Rapperswil

     Save time & money - Smart Internet Solutions