Stock Markets’ Integration in Post Financial Crisis Era: Evidence from Literature

Research Question: This study is conducted to organize the literature on long-run equilibrium of stock markets during the post-financial crisis era (2010-17), to document the latest developments. Motivation: Integration-status of markets contribute significantly to the decision of investment-diversification by a portfolio manager. Studies on the topic exist for pre-financial crisis period (e.g. Sharma and Seth (2012); however, we intend to organizes literature on the subject in post-financial crisis era. Financial crisis is a significant event of 21st century and knowing about developments in the area of market-integration is expected to enhance portfolio decision making. Idea: A collection and organisation of the published literature for review period to present a broader picture as opposed to empirical results of few selected markets. Data: Multiple studies have been published, however, we include 76 research articles [published in indexed Journals] in the area of market integrations during the period under review (2010-17). Method/Tools: We classified the publications based on country of origin; sample countries studied, sample periods, data frequency & econometric techniques used, and yearly publication trends, during the period under review. A selected review of findings is incorporated. Findings: Our findings suggest that developed and developing, larger GDP as well as Smaller GDP, countries have been researched during the period under review. Certain economic regions—Central Asia, East Europe, Africa (North, South, and Central), South America—have got less focus in research during the period under review, and offer potential research avenue. A period ranging from 9-17 years is the most widely used study period during the review period. Most widely used techniques to study market equilibrium are Correlation cointegration, regression and Granger causality. On the issue of integration, results indicate increase in integration of markets in various regions. Contributions: Our findings serve as a reference point for future researches in the area of portfolio diversification, potentially. To the best of our knowledge, no study has been conducted to organize the literature on market integration, covering post-financial crisis era.