Title: Ebb and flow? Co-integration with structural breaks between emerging markets in the EMEA and USA

Authors: Pinar Evrim Mandaci, Erdost Torun

Addresses: Faculty of Business, Department of Accounting and Finance, Dokuz Eylul University, Kaynaklar Campus, 35160, Buca-Izmir, Turkey. ' Faculty of Business, Department of Accounting and Finance, Dokuz Eylul University, Kaynaklar Campus, 35160, Buca-Izmir, Turkey

Abstract: In this paper, we try to analyse the long-run relationship between the stock prices of emerging markets in the Europe, Middle East and Africa (EMEA) region and the US market. Our aim is to find out whether these markets provide opportunities for international diversification to US investors. We employ the Gregory and Hansen (GH) (1996) co-integration test, which takes into account the structural breaks to analyse co-movements of the emerging markets in the aforementioned region with the USA over the period 1995-2008 using monthly data. We only find a long-run relationship between stock indices of Israel and the USA.

Keywords: stock market co-integration; structural breaks; international diversification; emerging markets; Europe; Middle East; Africa; EMEA; USA; United States; stock prices; Israel; stock markets.

DOI: 10.1504/IJEPEE.2010.032792

International Journal of Economic Policy in Emerging Economies, 2010 Vol.3 No.1, pp.16 - 32

Published online: 22 Apr 2010 *

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