The name is absent

series of iShares covering individual foreign equity markets; namely Australia, Austria, Belgium,
Brazil, Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia, Mexico, Netherlands,
Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom.
iShares do not invest in a basket of securities closely representing the market. Developed
(emerging) markets index funds would normally invest at least 95 % (60 %) of their assets in the
securities from the underlying index and American Depository Receipts (Chamberlain and Jordan
(2004)).

3. Literature Review

3.1. Earlier Studies of Equity Market Linkages

Grubel (1968) and Levy and Sarnat (1978) pointed to international diversification as a
possible source of welfare gains for individual investors. These works made analysis of
correlation the cornerstone of the portfolio analysis. Following their approach, earlier empirical
studies analyzed international correlations to infer about the extent of internationalization and
market interdependencies. For example, see Kaplanis (1988), Fisher and Palasvirta (1990),
Ratner (1992), Wahab and Lashagari (1993), Longin and Solnik (1995), King and Wadhwani
(1990), Bertero and Mayer (1990)). In particular, Longin and Solnik (1995), King and Wadhwani
(1990) and Bertero and Mayer (1990)) found the correlations between the equity markets to be
unstable and generally increasing during 1960-1990s.

Later research into market interdependencies relied on the cointegration methodology of
Engel and Granger (1987) and its multivariate extension by Johansen (1988) due to its perceived
relation with portfolio diversification (Alexander (1999), MacDonald (1995)). This branch of the
literature is very ample and includes, among others, Kasa (1992), Richards (1995), Arshanapalli
and Doukas (1996), Choudhry (1997), Francis and Leachman (1998), Phylaktis (1999), Manning

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