We apply the three-dimensional analysis of wavelet coherency to examine the integration of 22 emerging stock markets with the U.S. market. We find a high degree of co-movement at relatively lower frequencies between the U.S. and the 22 individual emerging markets. Our results show that the strength of co-movement, however, differs by country. For example, we report a high degree of co-movement between the U.S. and Brazil, Mexico and Korea, but low co-movement with and Egypt and Morocco. Our analyses also document a general change in the pattern of the market relationship after 2006, where we detect co-movements at relatively higher frequencies. Co-movement at the highest frequencies is, however, weak for fluctuations with duration less than a year. Our findings imply that investing selectively in emerging markets may provide significant diversification benefits which, invariably, depend on the investment horizon. © 2012 Elsevier Inc.
Graham, M., Kiviaho, J., & Nikkinen, J. (2012). Integration of 22 emerging stock markets: A three-dimensional analysis. Global Finance Journal, 23(1), 34–47. https://doi.org/10.1016/j.gfj.2012.01.003