The evolution of interdependence in world equity markets—Evidence from minimum spanning trees

✍ Scribed by Ricardo Coelho; Claire G. Gilmore; Brian Lucey; Peter Richmond; Stefan Hutzler

• Publisher: Elsevier Science
• Year: 2007
• Tongue: English
• Weight: 409 KB
• Volume: 376
• Category: Article
• ISSN: 0378-4371
• DOI: 10.1016/j.physa.2006.10.045

✦ Synopsis

The concept of a minimum spanning tree is used to study the process of market integration for a large group of national stock market indices. We show how the asset tree evolves over time and describe the dynamics of its normalized length, mean occupation layer, and single-and multiple-step linkage survival rates. Over the period studied, 1997-2006, the tree shows a tendency to become more compact. This implies that global equity markets are increasingly interrelated. The consequence for global investors is a potential reduction of the benefits of international portfolio diversification.