The Comparative Performance and Structural Stability of the Selected Asian Emerging Stock Markets

Year 2002, Volume: 4 Issue: 2, 217 - 221, 01.12.2002

M.t Vazırı

Abstract

This study analyzes the comparative performance of the emerging markets of Pacific Basin markets with respect to U.S. stock market and estimates the diversification benefits to the American investors utilizing a recent sample from January 1994-Decemebr 1996. Particular attention is placed on the analysis of time-variant coefficients derived from a rolling regression model. The study concludes that the extent of the benefits of portfolio diversification of the U.S. investors into Pacific Basin markets depend on at least two important factors: (a): the reduction of the portfolio risk without changing its mean and (b): variance of foreign index and its correlation with the U.S. index. A limited liquidity and turnover taxes and other barriers to investors in the Pacific Basin Stock Markets could cause the observed returns to exceed the returns available to U.S. investors.