Potential gains from international diversification depend upon the degree of market integration. This paper compares the degree of market integration before and after the stock crash in October 1987 and tests whether the results differ across different investment horizons. Empirical results show that the potential gains from diversification are greatly reduced to an increase in the correlation between stock markets after the stock crash. Our results are robust over different investment horizons.
Scopus Subject Areas
- Economics and Econometrics