Stock Market Interlinkages among Major Developed Equity Markets: Critical Literature Review

Abstract

This paper examines the short run linkages and long run linkages among the major developed equity markets. Stock market linkage or integration means a situation in which returns of different market affected by each other either in long run or short run. Stock market linkage is important from both perspectives whether there are strong stock market linkages or weak stock market linkages. If there is strong market linkage it protects the domestic economy from external shock. On another point of view if there are weak linkages, it offers potential gains to the investor by international portfolio diversification.