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This paper has reviewed an extensive literature examining stock market
integration. Recent empirical studies of market integration have shown
increasing interest in emerging stock markets. The results from the studies of
market integration have important implications for international portfolio
diversification and market efficiency. If stock markets are integrated the
scope of international diversification benefits might be limited, and also the
weak form of market efficiency will be violated. Econometric techniques
such as cointegration test, factor analysis and GARCH models provide a
useful tool to investigate the relationship among economic variables. In the
context of stock market integration, these techniques can be used to examine
whether international stock markets have a tendency to move together.
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