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Analysis of long-run benefits from international equity diversification between Taiwan and its major European trading partners: an empirical note

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This paper employs four cointegration test approaches, PO, HI, JJ and KSS, to test for pairwise long-run equilibrium relationships between Taiwan's stock price index and each of the stock price indexes of four European markets – French, German, Dutch, and British stock markets. The results from these four tests are robust and clearly consistent in suggesting that the Taiwan stock market is not pairwise cointegrated with the four European stock markets. This provides strong evidence that there exist long-run benefits for Taiwan investors diversifying in the equity markets of Taiwan's major European trading partners, France, Germany, Holland, and the UK, over the sample period considered from 6 January 1998 to 30 May 2002. These findings could be valuable to Taiwan individual investors and financial institutions holding long-run investment portfolios in the equity markets of France, Germany, Holland, and the UK.

Document Type: Research Article


Affiliations: 1: Department and Graduate Institute of Finance, Feng Chia University, Taichung, Taiwan 2: Department and Graduate Institute of Banking and Finance, Tamkang University, Taipei, Taiwan 3: Department of Finance, Providence University, Taichung, Taiwan

Publication date: October 20, 2006

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