STOCK MARKET INTEGRATION IN THE EMERGING MARKETS: SOME EMPIRICAL EVIDENCE

Numerous studies have investigated long-run relationship between emerging stock markets, but few interests have been focused on emerging markets in the Middle East region. In this paper we aim to investigate financial integration among five emerging stock markets in the Middle East region by using co-integration analysis. In the paper it is also examined that integration between these emerging markets and developed markets represented by US, UK and France. This will provide opportunity for to test the contagion effect of a possible crisis between developed and emerging markets. The empirical results show that all stock markets sampled are integrated with each other, which implies a limited diversification opportunities for regional investors. On the other hand the Middle Eastern stock markets promise long-run gains through portfolio diversification for international investors.