Globalization and Investment Opportunities: A Cointegration Study of Arab,U.S., and Emerging Stock Markets

Using a sample of Arab, U.S., and emerging stock markets from 1997 to 2002, this study is designed to determine if international diversification is still possible despite growing globalization and the consequent integration among various stock markets. Our results show that within Arab markets, Kuwait cointegrates individually with Jordan, Tunisia, and Saudi Arabia and between Tunisia and Jordan, thus offering investors possible continued diversification opportunities. On the other hand, only Jordan, Kuwait, and Morocco are cointegrated with the U.S. general market index, implying that these markets offer a probable substitute for those investing in the U.S. markets.