International portfolio diversification: A factor analysis approach

Hui, Tak Kee; Kwan, Edmond K.

doi:10.1016/0305-0483(94)90039-6

Cited by 14 publications

(7 citation statements)

References 12 publications

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“…One of the earliest studies is by Ripley (1973) who employs factor analysis to search for systematic variation patterns among 19 international equity markets over the period 1960-1970. There is evidence that countries like USA, Canada, Switzerland and the Netherlands have a low degree of unique variability, whereas South Africa and Japan have considerably high level of unique movement. Recent studies have included Asia-Pacific where Hui and Kwan (1994) and Hui (2005) investigate the systematic co-variation and inter-temporal stability of share prices for Asia-Pacific and US stock prices using factor analysis. Their results indicate that diversifications into Hong Kong, Taiwan, Japan and the USA are beneficial as the return generating processes are influenced by different factors.…”

Section: International Stock Market Return and Volatility Correlationmentioning

confidence: 99%

Volatility Decomposition and Correlation in International Securitized Real Estate Markets

Liow

Ibrahim

2008

J Real Estate Finan Econ

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Section: International Stock Market Return and Volatility Correlationmentioning

confidence: 99%

Volatility Decomposition and Correlation in International Securitized Real Estate Markets

Liow

Ibrahim

2008

J Real Estate Finan Econ

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“…An early study by Ripley (1973) found evidence that major stock markets moved together. Subsequently, Hui and Kwan (1994), Naughton (1996) and Hui (2005) employed factor analysis to examine the systematic variation patterns among the US and Asia-Pacific stock markets. Illueca andLafuente (2002), Fernandez-Izquierdo andLafuente (2004) adopted the same technique to investigate the systematic covariation of stock prices for four international areas, i.e.…”

Section: Introductionmentioning

confidence: 99%

A factor analysis of international portfolio diversification

Valadkhani

Chancharat²,

Harvie³

2008

Studies in Economics and Finance

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Purpose -The purpose of this paper is to investigate the relationships between stock market returns of 13 countries based upon monthly data spanning December 1987 to April 2007. Design/methodology/approach -Specifically, the principal component (PC) and maximum likelihood (ML) methods are used to examine any discernable patterns of stock market co-movements. Findings -Factor analysis provides evidence that stock returns in a number of Asian countries are highly correlated and, based on the resulting robust factor loadings, they form the first well-defined common factor. The paper also finds consistent results (based on both the PC and ML methods) suggesting that the stock market returns of developed countries are also highly correlated, and constitute our second factor. Practical implications -The paper concludes that, inter alia, geographical proximity and the level of economic development do matter when it comes to co-movements of stock returns and that this has important implications for financial portfolio diversification if the aim is to reduce systematic risks across countries. Originality/value -Very few previous studies have investigated the benefits from portfolio diversification by using the PC and ML methods.

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“…12 Hui and Kwan investigated the impact of diversification in the context of Asian Pacific markets. 13 In addition to this, the study of Shachmurove revealed diversification opportunities in the South American markets as well. 14 Hui used data from mature and emerging markets through factor analysis approach to investigate investment opportunities in Asian markets in international perspective.…”

Section: 10 Introductionmentioning

confidence: 90%

Nexus of Asian Equity Markets and Global Financial Crisis

2013

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The purpose of this study is to examine the effect of Global Financial Crisis on interlinking connectivity of Asian equity markets. Weekly data of 12 major stock indices from 1st January, 2000 to 10th September, 2010 is used in the study. The impact of Global Financial Crisis 2007 on co-movement of Asian markets is analyzed by applying Rotated Factor Analysis technique. Results of the analysis revealed that Asian markets demonstrate a linear interaction. However, nexus of Asian markets stayed similar in pre-and post-financial crisis periods. Findings of the study can be used by Asian regional investors to construct their investment portfolios to minimize the systematic risk through diversification.

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International portfolio diversification: A factor analysis approach

Cited by 14 publications

References 12 publications

Volatility Decomposition and Correlation in International Securitized Real Estate Markets

Volatility Decomposition and Correlation in International Securitized Real Estate Markets

A factor analysis of international portfolio diversification

Nexus of Asian Equity Markets and Global Financial Crisis

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