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
Our results show that t
he 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. Vol. 23, no 1, 34-47 p.