Co-Movements of Various Indices’ Prices in Bear and Bull Periods: Portfolio Diversification Implications
Öz
Portfolio diversification is investors’ crucial action to avoid negative market conditions or to gain more benefits from positive market conditions. Especially derivative instruments clung to various indices may cause negative returns during bear periods if required diversification is not provided on portfolio, and on the other hand, these instruments may cause to inadequately utilize from bull periods if the structure of a portfolio is not established well. Hence, in this study, to utilize the benefits from international portfolio diversification, certain international stock markets co-movements are investigated during three periods by using principal component analysis, and various portfolio diversification implications are generated after this empirical study. These periods are defined respectively a bear period which includes mortgage crises in 2008, a bull period as second period representing after the mortgage crises, a relatively bull period as third period representing the end of huge money supply to the market.
Anahtar Kelimeler
index co-movement, portfolio diversification, principal component analysis
Kaynakça
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