Measuring Co-Movement in International Portfolio Diversification

  • Godfrey Omojefe University of Port Harcourt, Nigeria
  • Blessing Gregory Rivers State University, Nkpolu-Oroworukwo, Port Harcourt, Nigeria

Abstract

This study aims at measuring co-movement in international portfolio diversification from 1981-2016. The study adopted the survey research design and time series data was sourced from World Bank. Various stock indexes were modeled to see the correlation among these indexes; and these foreign indexes were stress-tested against the all share price index of banks in Nigeria. The study employed the techniques of correlation, Cholesky Monte Carlo simulation, ARCH, ordinary least squares, unit root test and granger causality test. An examination of the OLS regression estimate shows that Dow Jones industrial Average, JSE index, Nikkei, Sao Paulo index, Shang and Tokyo price Index(Topix) have positive and significances relationship with All Share Index of banks in Nigeria, But Johannesburg Index, Standard and Poor index  and Dax index have insignificant relationship with All Share Price of Banks. The results of the Johansen co-integration test shows that there are nine linear combination of the variables that are stationary in the long run and also confirms the existence of positive long run dynamics relationship with the dependent variable. The positive long run effects confirm to the expectation of this study and the contagiousness and spillover of stock market worldwide. It can be seen that the Cholesky innovation standard deviation emanating from these exogenous shock simulated into the share indices of the Nigerian banking sector affected the sectorial share index. Thus, the study concludes that there is high level of contagiousness and spiral effects between the various stock markets globally. This work recommends that, all investors should carefully appraise the stocks and markets they wish to invest in or ensure that the portfolio combinations are uncorrelated; this they could do by employing the services of a reputable investment consultants.


Keywords: Portfolio, International Portfolio, Diversification, International Portfolio Diversification

Published
2020-01-27
How to Cite
OMOJEFE, Godfrey; GREGORY, Blessing. Measuring Co-Movement in International Portfolio Diversification. NIU Journal of Social Sciences, [S.l.], v. 5, n. 4, p. 25-34, jan. 2020. ISSN 3007-1690. Available at: <https://www.kampalajournals.ac.ug/ojs/index.php/niujoss/article/view/682>. Date accessed: 05 apr. 2026.
Citation Formats
Issue
Vol 5 No 4 (2019): KIU Journal of Social Sciences, Vol. 5 No. 4, December 2019
Section
Articles

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