Reflection of the cointegration relation among the stock markets on the portfolio choices: An empirical application for fragile five countries

Abstract

The aim of this study is to examine the long-term relationship between each pair of the countries separate from those in the Stock Markets of Fragile Five Countries and determine the optimal portfolio options for each of the BIITS countries according to the pieces of evidence obtained. Thus, the reflection of the concertedness among financial markets to the optimal portfolio options has been studied. Accordingly, long term relationships between each pair of BIITS countries have been investigated with monthly price value between June 2006 and July 2015 by means of Maki Cointegration Test. Optimal portfolio options have been established according to the Markowitz Model considering the long-term relationships between the markets. The pieces of evidence obtained show that lower-risk portfolios than the ones in their own national markets can be established in BIITS countries by applying international diversification.

The Dynamics of Exchange Rate and Stock Return Before and After the Fed Policy Normalization: Evidence from Fragile Five Countries

“…In the previous study, Tuna (2016) found that there was a cointegration relationship between the stock exchanges of Fragile Five countries using the Maki Cointegration Test method using monthly stock price data from the period June 2006 to July 2015. This study also provides portfolio diversi ication recommendations through the long-term approach.…”