Faculty Scholarship 1994 - Present

Co-Movements of U.S., U.K., and Asian Stock Markets Before and After September 11, 2001

Empirical studies show that the correlation between national stock markets tends to increase and the benefits of global portfolio diversification tend to decrease after events of global importance. In this paper, we test this hypothesis by using the correlation analysis, principal components analysis, and Granger causality statistical techniques, and by comparing the co-movements of the U.S., U.K., and six major Asian stock markets during the five-year period before and during the five-year period after September 11, 2001. Our findings indicate that the co-movement patterns of the eight stock markets changed, correlation between them increased, and the benefits of global portfolio diversification with these stock markets decreased significantly after September 11, 2001.