Looking at how well financial markets across the world are being traded and how these markets are synchronized and integrated gives an investor questions on how to invest in the global financial markets and what are the risks associated with investing in a portfolio with different international stocks. In the modern financial world the concept of correlation was introduced under the capital asset pricing model as a tool for investors to determine the diversification of portfolios, generally the higher the diversification the better return/risk ratio. Today investors must have basic understanding about the co-movement and risk measures of the market and how this movement change over time due to economic shocks that occurred during past years to make the right decision in order to diversify risk and derive high returns in the global market. Recently a lot of research’s have been conducted about correlation to prove the relationship of economic shocks and co-movement of different market correlation, according to my research most of the conducted research shown to prove a positive relationship between correlation and economic crisis. This paper will conduct similar examination of 5 major markets around the world including the Omani market in hope to produce positive results to the prior researchers and show that increase in market integration overtime is a valid statement and belief to all the financial and economics analysis.
The purpose of the study:
The purpose of this paper is to examine whether the Omani market MSM and other major markets around the world are being affected by the same economic shocks and determine the co-movement of the markets for the past 10 years to observe if the markets are getting more correlated and integrated.
To help achieve my investigation of stock market integration and correlation coefficient relationship I used a sample of 5 major markets: America (Nasdaq), America (spx),...