Review of Stock Market Integration: An International Perspective

With a view to know the interdependence of stock markets located all over the world and to realize the potential risk and rewards of global diversification, the present study presents a brief review of past literature on stock market integration in the international scenario. All the studies are categorized into three parts, namely, studies examining only the presence of interdependence, studies investigating the possible changes in such relationship over time and studies explaining the possible causes of such interdependence. The foregoing review reveals that the stock markets of different countries are interdependent both within and across the country. The present study confirms that though there are a number of studies explaining stock market interdependence, the literature stating why stock markets are interdependent is quite sparse. Again, so much emphasis has been given to the event of ⬠SOctober 1987 crises⬠in the existing studies possibly to check the extent of such interdependence over time. This study covers the previous works which have applied different methodologies to test the stock market integration. A brief description of all those studies is presented in the Appendix