EQUITY MARKET INTEGRATION IN SELECTED OPEC COUNTRIES

Abstract

Financial liberalization has led to an increase in capital flows across the countries that are paving the way for an increasing stock markets integration. This integration among various financial markets is believed to have a positive impact on the equity markets around the world. The information about the integration of these markets is used to improve the efficiency of the portfolios diversification and securing them against different types of risks. This study aimed to examine the integration among selected equity markets of the Organization of Petroleum Exporting Countries (OPEC). The integration among the selected equity markets and the international equity markets was also examined whereas the US and the UK markets were chosen as a proxy to represent international markets. The S&P 500 and FTSE 100 were selected to represent the US and UK financial markets. The autoregressive distributed lag (ARDL) modeling approach is employed to find the integration among the selected markets because of its superior properties. The results showed that there was a strong integration within OPEC markets and with the international equity markets  and affected each other that provided a limited opportunity for OPEC investors to have a good diversification for their portfolios