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Diversification opportunities between emerging and frontier Asian (EFA) and developed stock markets

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  • Narayan, Seema
  • Ur Rehman, Mobeen

Abstract

We show a stable long-run relationship between three developed and ten emerging frontier Asian (EFA) equity markets over the period 2000 to 2013 using daily, weekly, and monthly data. Across the three frequencies, DJIA returns are good predictors of EFA markets but the predictive power of Nikkei225 and S&P 500 differ. Further, during the GFC, the DJIA and Nikkei225 (not S&P 500) are influential. Non-GFC periods see all three important but S&P 500 was more persistent. We also reveal that the developed markets may be more important than other emerging market predictors, such as exchange rates and oil price shocks.

Suggested Citation

  • Narayan, Seema & Ur Rehman, Mobeen, 2017. "Diversification opportunities between emerging and frontier Asian (EFA) and developed stock markets," Finance Research Letters, Elsevier, vol. 23(C), pages 223-232.
  • Handle: RePEc:eee:finlet:v:23:y:2017:i:c:p:223-232
    DOI: 10.1016/j.frl.2017.06.007
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    1. repec:eee:ememar:v:34:y:2018:i:c:p:42-63 is not listed on IDEAS
    2. repec:eee:phsmap:v:492:y:2018:i:c:p:2136-2153 is not listed on IDEAS

    More about this item

    Keywords

    Emerging and frontier markets; Equity returns; VECM; Co movements; Asia;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F3 - International Economics - - International Finance
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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